E^S 

•M 


7*5 


VMS 


$B    T7    352 


CONFIDENTIAL 


^Report  of  Conference 

Held  at  Washington,  D.  C. 
on  May  19,  1919 


between 

Shipbuilders  from  Great  Lakes, 
Atlantic  and  Gulf  Coast  Districts 

and 

United  States  Shipping  Board 
Emergency  Fleet  Corporation 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1919 


,     '.,  •   ••  ft 

I  ^~S 


CONFERENCE  BETWEEN  SHIPBUILDERS  AND  D.  S.  SHIPPING 
BOARD  EMERGENCY  FLEET  CORPORATION. 


WASHINGTON,  D.  C.,  May  19,  1919. 

Morning  session  convened  at  11  a.  m.,  recessed  1  p.  m.  After- 
noon session  convened  at  2.30  p.  m.,  adjourned  at  5.35  p.  m. 

Present,  representing  United  States  Shipping  Board  Emergency 
Fleet  Corporation: 

Messrs.  Edward  N.  Hurley,  president;  R.  B.  Stevens,  vice  president; 
John  A.  Donald,  vice  president ;  J.  H.  Rosseter,  director  of  operations,  trustees. 

J.  L.  Ackerson,  vice  president ;  I.  A.  Campbell,  admiralty  counsel ;  James  V. 
Converse,  assistant  secretary. 

W.  C.  Ward;  H.  V.  Amberg;  H.  C.  Sadler,  naval  architect;  P.  S.  Tyre,  staff 
assistant  to  Vice  President  Ackerson. 

Present,  representing  shipbuilding  companies: 

American    International    Shipbuilding   Corporation,    Hog   Island,    Pa.     Brush, 

M.  C.,  president. 
American  Shipbuilding  Co.,  Cleveland,   Ohio.     Davison,  J.  E.,  vice  president; 

Kelley,  H.  A.,  general  counsel ;  Smith,  A.  G.,  operating  manager. 
Atlantic  Coast  Shipbuilding  Co.     Carroll,  J.  B.,  assistant  secretary. 
Atlantic  Corporation,  Portsmouth,  N.  H.     Proskey,  W.  Scott,  vice  president. 
Baltimore  Dry  Dock  &  Shipbuilding  Co.     Evans,  H.  A.,  president ;  Willis,  J.  M., 

vice  president  and  general  manager. 
Bayles  Shipyard  (Inc.),  Port  Jefferson,  Long  Island.     Smiley.  J.  B.,  president 

and  general  manager. 
Bethlehem  Shipbuilding  corporation    (Ltd.),  Wilmington,  Del.     Smith,  H.  G., 

manager. 

Carolina  Shipbuilding  Co.,  Wilmington,  N.  C.     Dilke,  F.  C.,  president. 
Chester  Shipbuilding  Co.,  Chester,  Pa.     Smith,  W.  T. 
Wm.  Cramp  &  Sons  Ship  &  Engine  Building  Co.,  Philadelphia.     Mull,  J.  H., 

president. 
Doullut  &  Williams  Shipbuilding  Co.,  (Inc.),  New  Orleans,  La.     Doullut,  M.  P., 

president. 

Downey  Shipbuilding  Corporation,  Staten  Island.     Downey,  W.,  president. 
Globe  Shipbuilding  Co.,  Superior,  Wis.     Cooke,  B.  C.,  president ;  Massey,  C.  A., 

vice  president. 
Great  Lakes  Engineering  Works,  Detroit,  Mich.     Pessano,  Antonio  C.,  chairman 

of  board  of  directors ;  Russel,  J.  R.,  president. 

Groton  Iron  Works,  Groton,  Conn.     Morse,  E.  A.,  president ;  Morse,  C.  W. 
Los  Angeles  Shipbuilding  and  Dry  Dock  Co.,  Los  Angeles  Harbor.     Napthaly, 

Sam  L.,  vice  president  and  general  manager. 

McDougall-Duluth  Co.,  Duluth,  Minn.     McDougall,  A.  M.,  president. 
Manitowoc    Shipbuilding   Co.,    Manitowoc,    Wis.     Geer,    T.    E.,    secretary    and 

treasurer;  McClellan  ;  Nash,  A.  T.,  auditor;  West,  Charles  C.,  vice 

president  and  general  manager. 

Merchant  Shipbuilding  Corporation,  Bristol,  Pa.     Smith,  W.  T.,  vice  president. 
Newport  News  Shipbuilding  &  Dry  Dock  Co.    Gauntlet,  T.  J.,  Washington 

representative. 

Oscar  Daniels  Co.,  Tampa,  Fla.    Sadtler,  Edwin  B.,  consulting  naval  architect. 
Pensacola  Shipbuilding  Co.,  Pensacola,  Fla.    Soule,  F.,  second  vice  president 

and  general  manager. 
Standard  Shipbuilding  Co.,  Shooters  Island,  N.  Y.     Dickerson,  H.  L.,  auditor ; 

Hunter,  H.  C.,  secretary. 

(3) 


36055 


Saginaw  Shipbuilding  Co.,  Sagniaw,  Mich.     Stiner,  C.  W.,  naval  constructor. 
Submarine  Boat  Corporation,  New  York  City.     Carse.  Henry  R.,  president. 
Sim  Shipbuilding  Co.,  Chester,  Pa.     Haig,  Robert,  vice  president;  Pew,  John  C., 

president 

Terry  Shipbuilding  Co  .  Mobile,  Al.a.     Brittain,  H.  L.,  vice  president, 
Toledo  Shipbuilding  Co.,  Toledo,  Ohio.     Calder,  Charles  B.,  vice  president  and 

general  manager;  Wilkinson,  H.  S.,  president. 
Virginia  Shipbuilding  Corporation,  Alexandria,  Va.     Morse,  C.  W.,  director. 

Present,  representing  shipbuilding  companies: 

Brittain,  H.  L.,  vice  president  Terry  Shipbuilding  Co. 

Brush.  M.  C.,  president  American  International  Shipbuilding  Corporation. 

Calder,  Charles  B.,  vice  president  and  general  manager  Toledo  Shipbuilding  Co. 

Carroll,  J.  B.,  assistant  secretary  Atlantic  Coast  Shipbuilding  Co. 

Carse,  Henry  R.,  president  Submarine  Boat  Corporation. 

Cooke,  B.  C.,  president  Globe  Shipbuilding  Co. 

Davison,  J.  E.,  vice  president  American  Shipbuilding  Co. 

Dickerson,  H,  L.,  auditor  Standard  Shipbuilding  Co. 

Dilke,  F.  C.,  president  Carolina  Shipbuilding  Co. 

Doullut,  M.  P.,  president  Doullut  &  Williams  Shipbuilding  Co.    (Inc.). 

Downey,  W.,  president  Downey  Shipbuilding  Corporation. 

Evans,  H.  A.,  president  Baltimore  Dry  Dock  &  Shipbuilding  Co. 

Gauntlet,  T.  J.,  Washington  representative  Newport  News  Shipbuilding  &  Dry 

Dock  Co. 

Geer,  T.  E.,  secretary  and  treasurer  Manitowoc  Shipbuilding  Co. 
Haig,  Robert,  vice  president  Sun  Shipbuilding  Co. 
Hunter,  H.  C.,  secretary  Standard  Shipbuilding  Co. 
Kelley,  H.  A.,  general  counsel  American  Shipbuilding  Co. 

McClellan,  ,  Manitowoc  Shipbuilding  Co. 

McDougall,  A.  M.,  president  McDougall-Duluth  Co. 

Massey,  C.  A.,  vice  president  Globe  Shipbuilding  Co. 

Morse,    C.    W.,   director   Virginia    Shipbuilding   Corporation   and   Groton   Iron 

Works. 

Morse,  E.  A.,  president  Groton  Iron  Works. 

Mull,  J.  H.,  president  Wm.  Cramp  &  Sons  Ship  &  Engine  Building  Co. 
Napthaly,  Sam  L.,  vice  president  and  general  manager  Los  Angeles  Shipbuilding 

and  Dry  Dock  Co. 

Nash,  A.  T.,  auditor,  Manitowoc,  Wis. 
Pessano,  Antonio  C.,  chairman  of  board  of  directors  Great  Lakes  Engineering 

Works. 

Pew,  John  C.,  president  Sun  Shipbuilding  Co. 
Proskey,  W.  Scott,  vice  president  The  Atlantic  Corporation. 
Russel,  J.  R.,  president  Great  Lakes  Engineering  Works. 
Sadtler,  Edwin  B.,  consulting  naval  architect  Oscar  Daniels  Co. 
Smiley,  J.  B.,  president  and  general  manager  Bayles  Shipyard  (Inc.). 
Smith,  A.  G.,  operating  manager  American  Shipbuilding  Co. 
Smith,  H.  G.,  manager  Bethlehem  Shipbuilding  Corporation  (Ltd.). 
Smith,  W.  T.,  vice  president  Merchant  Shipbuilding  Corporation  and  Chester 

Shipbuilding  Co. 

Stiner,  C.  W.,  naval  constructor  Saginaw  Shipbuilding  Co. 

Soule,  F.,  second  vice  president  and  general  manager  Pensacola  Shipbuilding  Co. 
West,  Charles  C.,  vice  president  and  general  manager  Manitowoc  Shipbuilding 

Co. 

Wilkinson,  H.  S.,  president  Toledo  Shipbuilding  Co. 

Willis,  J.  M.,  vice  president  and  general  manager  Baltimore  Dry  Dock  &  Ship- 
building Co. 

Mr.  HUELEY.  Gentlemen,  at  a  recent  meeting  of  the  board  of 
trustees  of  the  Emergency  Fleet  Corporation  it  was  decided  to  ex- 
tend to  all  the  shipbuilders  on  the  Atlantic  coast  and  the  Great  Lakes 
an  invitation  to  attend  a  conference  with  the  members  of  the  board 
and  the  officers  of  the  corporation,  with  the  thought  in  mind  of  hav- 
ing a  round-table  discussion  as  to  the  various  points  referred  to  in 
my  recent  letter  to  the  companies  with  which  the  corporation  has 
contracts,  and  to  consider  ways  and  means  to  continue  the  shipbuild- 


5 

ing  industry  along  sound,  practical,  commercial  lines,  to  compare 
notes,  and  endeavor  to  solve  the  problems  with  which  we  have 
to  contend  in  connection  with  the  shipbuilding  program,  and  to  re- 
ceive suggestions  from  you  as  to  the  operation  and  ownership  of  our 
merchant  marine,  and  as  a  result  of  this  meeting  we  hope  to  receive 
many  beneficial  ideas  to  aid  us  in  arriving  at  a  definite  conclusion. 

We  have  been  working  under  war  emergency  conditions,  and  per- 
haps for  that  reason  the  point  of  contact  has  not  been  as  close  as  we,, 
the  trustees,  have  desired ;  however,  everything  that  was  done  during 
the  past  two  years  has  received  our  approval  and  we  indorse  the  ac- 
tions of  our  former  representatives.  With  the  cessation  of  hostilities, 
however,  we  faced  new  conditions,  and  one  of  the  objects  of  this 
meeting  is  to  acquaint  you  with  the  suituation  confronting  the  board 
with  regard  to  securing  funds  from  Congress  to  proceed  with  the 
shipbuilding  program,  which  funds  have  heretofore  been  authorized 
but  not  appropriated.  We  are  going  to  recommend  the  building  of 
ships  larger  than  those  built  under  war  conditions,  but  obviously  we 
can  not  appear  before  the  Appropriations  Committeee  and  urge  the 
appropriation  of  money  to  construct  ships  at  the  high  prices  which 
prevailed  under  war  conditions.  We  must  present  specific  information 
as  to  the  cost  of  construction  of  the  new  types  of  ships  we  will  recom- 
mend. With  that  thought  in  mind,  and  the  fact  that  we  have  con- 
tracts for  a  number  of  ships,  the  keels  of  which  have  not  yet  been 
laid,  all  of  which  were  contracted  for  under  war  conditions,  we 
thought  you  gentlemen — who  are  so  vitally  interested  in  the  future  of 
the  shipbuilding  enterprise — should  be  advised  of  the  conditions  con- 
fronting the  board,  and  we  hope  as  a  result  of  this  conference  and 
at  which  we  exchange  views  to  incorporate  some  definite  recom- 
mendations in  the  plan  the  Shipping  Board  will  present  to  Congress. 
The  Congress  is  not  going  to  grant  appropriations  as  quickly  as 
heretofore  and  we  can  not  and  should  not  expect  them  to  do  so.  "The 
congressional  committees  will  demand  figures  as  to  the  cost  of  ship 
construction  which,  under  war  conditions  were  not  available  or 
could  not  be  complied  without  great  loss  of  time.  We  are  planning 
to  ask  for  approximately  $690,000,000;  we  were  authorized  by  Con- 
gress to  spend  $3,671,000,000.  We  are  now  within  the  amount  au- 
thorized. That  is,  we  have  not  gone  beyond  these  figures,  but  we  do 
want  to  present,  when  we  are  asking  for  an  additional  appropriation, 
some  definite  data  as  to  the  cost  of  the  ships  the  keels  of  which  have 
not  yet  been  laid.  We  desire  your  cooperation  and  the  benefit  of  your 
advice  and  views,  so  that  the  plan  presented  by  us  to  Congress  will 
include  the  views  of  the  experienced  shipbuilders  as  well  as  the  board. 
I  am  going  to  ask  Mr.  Stevens  to  make  a  few  remarks,  also  Mr.  Don- 
ald, and  when  any  gentlemen  addresses  the  conference,  or  when  you 
stand  up  during  the  hearing — we  are  going  to  be  in  session  all  day, 
so  that  we  may  have  a  free  and  frank  exchange  of  views — you  are  re- 
quested to  announce  your  name  and  that  of  the  company  you  repre- 
sent so  that  the  stenographer  will  have  all  the  facts,  and  I  want  each 
gentlemen  present  to  feel  that  the  board  desires  a  candid  expression 
from  each  man.  We  want  the  facts,  and  if  we  do  not  get  them  we  will 
be  seriously  handicapped,  so  do  not  hesitate  to  interrogate  us ;  we  are 
seeking  information  and  we  are  going  to  ask  you  questions,  so  do 
likewise  with  us. 


Mr.  STEVENS.  The  main  purpose  of  this  meeting  is  to  discuss  with 
the  shipbuilders  in  what  way  the  cost  of  ships,  where  the  keels  have 
not  yet  been  laid  down,  may  be  reduced  in  order  to  justify  the  board 
in  asking  Congress  to  appropriate  the  necessary  money  to  complete 
these  contracts.  Now  that  the  war  is  over,  we  have  to  justify  that 
demand  for  more  appropriations,  not  by  war  conditions  and  war 
needs,  but  by  peace  conditions.  During  the  war  revisions  and  changes 
in  contracts  were  made  to  meet  emergency  conditions,  and  the  trus- 
tees of  the  Emergency  Fleet  Corporation  were  in  hopes  that  now 
the  war  is  over  it  might  be  possible  to  secure  some  revision  of  the 
contracts  where  the  keels  are  not  yet  laid  down,  so  that  the  ships 
when  built  might  cost  somewhere  nearer  what  their  value  will  be  in 
world  competition  than  they  would  under  the  original  contracts. 
That  is,  as  I  understand  it,  the  chief  purpose  of  this  conference,  and 
we  want  to  get  directly  from  the  shipbuilders,  before  any  definite 
plan  is  adopted  by  the  trustees,  their  point  of  view  and  their  sug- 
gestions on  this  matter,  which  of  course  is  so  vital  to  them. 

Mr.  DONALD.  It  seems  to  me,  gentlemen,  that  the  indefiniteness 
of  the  contract  that  we  have,  as  to  cost,  is  something  that  we  are 
going  to  be  held  very  strictly  accountable  for  by  this  Congress  which 
is  meeting  now,  and  I  think  if  you  gentlemen  can  address  your- 
selves to  getting  a  lump-sum  price,  instead  of  a  cost-plus  contract, 
that  that  is  a  thing  which  will  go  very  far  toward  establishing  your- 
selves in  the  eyes  of  Congress,  and  that  is  a  matter  which  we  our- 
selves would  like  to  see  as  being  the  proper  thing  to  do  in  this 
crisis.  I  think  that  now  that  you  gentlemen  have  had  the  experi- 
ence of  two  years  of  building  ships,  you  ought  to  come  very  near 
getting  the  costs  as  to  what  you  are  going  to  build  the  ships  for. 
Practice  brings  perfection,  and  you  are  going  to  do  better,  I  think, 
in  the  future,  in  building  ships  than  you  have  done  before.  Now, 
you  must  have  some  definite  idea  as  to  what  the  cost  of  building 
the  ships  will  be,  and  I  can  only  urge  you  to  meet  the  views  of  Con- 
gress as  much  as  possible  in  bringing  the  price  to  a  lump-sum  basis 
which  you  will  be  able  to  go  ahead  for,  and  we  are  anxious  to  see 
you  get  the  contracts  on  that  basis. 

We  have  to  keep  the  shipbuilding  industry  going  in  this  country. 
You  gentlemen  have  large  sums  of  money  invested  in  it;  many  of 
you  have  made  large  sums  of  money,  and  I  would  appeal  to  you 
to  do  the  best  you  can  to  meet  the  present  conditions.  We  know 
you  have  all  made  money,  and  it  has  come  around  that  way,  and  I 
would  like  to  see  a  lump -sum  contract  as  a  substitute  for  the  condi- 
tion under  which  we  are  working  now.  I  do  not  think  I  have  any- 
thing else  to  say  at  this  time. 

Mr.  HURLEY.  The  board  appreciates  the  necessity  of  the  ship- 
builders making  money,  and  in  outlining  your  plans,  we  are  par- 
ticularly anxious  that  the  margin  should  be  safe  and  sound,  both 
from  your  point  of  view  and  the  workmen's.  We  do  not,  however, 
want  to  get  into  a  discussion,  in  any  way,  which  might  involve  the 
reduction  of  wages. 

It  is  our  idea  to  increase  efficiency  and  by  so  doing  reduce  the 
cost  of  shipbuilding,  which  will  be  good  for  the  yards,  good  for  the 
country,  and  good  for  the  Government. 

The  embargo  against  building  steel  vessels  for  foreign  account,  as 
you  know,  gentlemen,  has  been  lifted  by  the  President,  so  long  as 


it  does  not  interfere  with  the  building  program  of  the  American 
merchant  marine.  It  is  our  idea,  however,  that  all  contracts  ne- 
gotiated by  you  for  the  construction  of  ships  for  foreign  account 
should  clear  through  the  Shipping  Board,  as  a  matter  of  record.  I 
think  we  can  be  helpful  to  everyone  of  you  in  getting  some  foreign 
contracts,  but  we  are  very  anxious,  when  you  make  your  bid  to  a 
foreign  purchaser,  when  the  deal  has  developed  to  such  a  point,  that 
before  closing  your  transaction  you  consult  with  the  trustees  of  the 
Emergency  Fleet  Corporation  and  Shipping  Board  and  keep  in 
touch  with  them;  the  information  you  give  us  will  be  considered 
confidential  and  will  not  be  distributed,  and  your  competitors  will 
know  nothing  about  it.  While  negotiations  are  going  on  we  are  not 
particularly  keen  that  you  should  advise  us  what  you  are  doing,  but 
when  the  matter  comes  to  the  point  where  the  deal  will  be  closed,  we 
ask  that  before  finally  closing  you  consult  with  the.  Shipping  Board 
and  receive  its  approval. 

Now,  there  are  two  foreign  governments  planning  to  place  orders 
in  this  country.  They  have  negotiated  for  about  1,500,000  of  ship- 
ping. I  do  not  know  just  what  has  developed  during  the  past  few 
weeks,  but  we  will  have,  within  a  few  days,  definite  information  as  to 
the  type  and  style  of  ship  they  require,  and  about  the  price  they 
want  to  pay.  If  we  can  get  a  line  on  the  prices  that  you  gentlemen 
can  build  ships  for  of  certain  sizes  and  types,  it  is  going  to  be  very 
helpful  to  us  in  closing  negotiations.  For  example,  who  represents 
the  Great  Lakes  here  ? 

Mr.  TYRE.  All  the  Great  Lakes  companies  are  here. 

Mr.  HURLEY.  How  many  of  them  are  here  ? 

Mr.  TYRE.  Seven. 

Mr.  HURLEY.  How  many  keels  are  there  to  be  laid  on  the  Great 
Lakes  out  of  the  seven  companies  ? 

Mr.  TYRE  (reads).  "Keels  to  be  laid,  after  May  15,  65 — dead- 
weight tonnage,  263,000." 

Mr.  HURLEY.  Well,  that  is  one  of  the  localities  in  which  we  are  par- 
ticularly interested.  First,  on  account  of  the  large  number  of  the 
Lake  boats  we  have  on  hand,  and,  second,  the  fact  that  we  can  not 
substitute  a  large  type  ship  for  any  cancellations  that  may  be  made, 
so  that  if  the  Great  Lakes  people  will  get  together  and  give  us  a  re- 
vised flat  price,  we  may  be  able  to  transfer  the  contract  to  some  for- 
eign Government  and  have  the  entire  number  of  ships  contracted  for 
built.  I  do  not  know  how  you  gentlemen  work  together  on  these 
things,  but  I  presume  the  contracts  were  practically  the  same  with 
all  the  seven  shipbuilders  on  the  Great  Lakes. 

Mr.  ACKERSOX.  It  was  fixed  at  $180  and  $20,000  for  military  re- 
quirements. I  think  it  is  a  flat  $200,000. 

Mr.  HURLEY.  What  are  the  ships  costing  us  now  ? 

Mr.  PESSAXO  (of  the  Great  Lakes  Engineering  Works).  About 
$190,000. 

Mr.  HURLEY.  Well,  if  we  were  to  cancel  the  laying  of  the  keels,  and 
get  a  substitute  which  we  could  sell  at  a  pretty  fair  price,  couldn't 
you  gentlemen  work  out  some  plan  whereby  that  could  be  reduced, 
so  that  we  could  make  a  sale  without  the  Government  losing  the  dif- 
ference ?  If  we  continue  to  build,  we  know  that  we  have  to  sell  them. 
A  foreign  government  would  not  pay  this  sum. 


8 

Mr.  PESSANO.  Mr.  Chairman,  speaking  for  the  Great  Lakes  Engi- 
neering Works,  we  have  all  of  our  keels  down  now,  with  the  excep- 
tion possibly  of  six,  and  for  these  six  the  materials  are  very  well  ad- 
vanced. I  would  say,  in  a  number  of  detailed  instances,  the  materials 
are  100  per  cent  out  and  ready  for  installation  as  soon  as  the  hull  has 
been  launched.  It  must  be  taken  into  consideration  that,  as  far  as 
our  company  is  concerned,  we  have  not  had  one  dollar  from  the 
United  States  Government  or  from  the  Shipping  Board  or  from  the 
Emergency  Fleet  Corporation,  and  that  we  have  paid  for  the  vast 
improvements  that  were  made,  and  which  were  made — I  was  going 
to  say,  as  a  suggestion,  but  I  will  put  it  in  other  words,  in  the  terms 
of  an  order — Commander  Ackerson  was  the  only  gentleman  present 
representing  the  Emergency  Fleet  Corporation.  That  meeting  was 
held  on  the  20th  day  of  May  last  year,  in  Cleveland,  and  we  were 
told  then  that  we  should  reduce  our  prices,  which  we  did. 

Mr.  HURLEY.  What  were  you  getting  before  that? 

Mr.  PESSANO.  I  had  made  contracts  before  that  as  high  as  $875,000. 

Mr.  HURLEY.  How  much  is  that  a  ton  ? 

Mr.  PESSANO.  That  ran  about  $225  a  ton.  We  reduced  our  prices, 
due  to  the  fact  that  we  had  gone  on  and  made  improvements  and 
spent  our  money  and  learned  to  do  things  quickly.  We  reduced  our 
prices  to  a  basis,  including  military  equipment,  of  $800,000.  We  ac- 
cepted $800,000  for  these  ships  and  then  agreed  to  spend  all  that 
money 

Mr.  HURLEY.  How  much  money  did  you  spend  ? 

Mr.  PESSANO.  Over  two  and  a  half  million  dollars. 

Mr.  HURLEY.  How  much  a  ton  deadweight  are  you  getting  now? 

Mr.  PESSANO.  At  the  present  time,  about  $190.  We  have  had  the 
question  of  cancellation  up.  In  other  words,  we  have  completed  our 
contracts,  Mr.  Hurley.  We  were  running  six  months  ahead  of  time. 
We  would  have  completed  everything  by  the  latter  part  of  July, 
when  the  armistice  came  on,  and  it  was  a  question  of  readjustment 
by  the  board,  and  we  took  it  up  with  Mr.  Schwab  and  Mr.  Piez— 
and  Mr.  Donald  is  familiar  with  the  facts,  I  came  to  see  him  in 
your  absence — and  it  was  decided  then,  as  a  matter  of  good  policy, 
in  the  interest  of  the  employees,  that  instead  of  going  on  at  the  rate 
we  were  going,  we  should  slacken  up;  keep  the  employees  at  work, 
reducing  their  hours  and  stretching  our  contract  to  the  point  where 
it  called  for  completion,  which  was  the  15th  of  November.  We  will 
complete  the  contract  by  the  15th  of  November,  although  we  would 
have  completed  it  in  July,  if  we  had  not  followed  the  policy  of  the 
President.  I  know  it  was  your  policy,  as  expressed  by  Mr.  Donald, 
to  do  everything  we  could  to  keep  the  shipbuilders  at  work.  All  the 
shipbuilders  of  the  Lakes  followed  that  out.  I  think  the  American 
Shipbuilding  Co.  would  have  completed  their  contract  well  in  ad- 
vance of  the  obligation.  I  think  one  or  two  of  the  smaller  concerns 
have  fallen  behind  there,  but  the  great  majority  would  have  been 
finished  in  time. 

Mr.  HURLEY.  Don't  you  think  that  was  a  wise  policy  ? 

Mr.  PESSANO.  Patriotically  speaking,  yes. 

Mr.  HURLEY.  From  a  business  standpoint  it  was  not  good  policy 
to  continue  on  the  lines  we  were  working  on  during  the  war.  You 
could  not  have  proceeded  as  economically  under  that  policy  as  you 
could  under  a  sane,  orderly  procedure. 


Mr.  PESSANO.  I  don't  quite  agree  with  you,  Mr.  Hurley.  I  tell  you 
right  here ;  we  had  the  right,  as  shipbuilders,  to  expect  that  freedom 
of  trade  was  going  to  follow  in  the  shipbuilding  line,  as  it  was  in 
other  lines  of  trade,  and  the  shipbuilders  naturally  looked  for  the 
embargo  to  be  lifted  with  respect  to  contracting  with  foreign  coun- 
tries for  ships.  I  had  that  under  discussion  with  Commissioner 
Donald,  and  he  quite  agreed  with  me.  Mr.  Piez  agreed  with  me,  in 
your  absence,  and  I  think  a  cable  was  sent  asking  that  that  be  done. 

I  had  a  contract  with  the  French  people  for  10  ships,  terms  agreed 
to  and  prices  exactly  the  same  as  the  Shipping  Board  would  pay. 
They  agreed  to  that — they  agreed  to  the  terms  of  the  contract,  which 
was  more  along  commercial  lines.  When  I  speak  of  it  as  "  com- 
mercial," I  mean  in  line  with  what  we  do  commercially  rather  than 
what  we  do  with  Government  contracts.  Now,  that  was  agreed  to 
when  the  thing  was  thrown  in  the  air  by  reason  of  the  gentleman's 
request  which  came  from  Paris  to  suspend  further  negotiation. 

Mr.  HURLEY.  It  was  never  suspended;  it  was  never  authorized. 
The  law  prevents  that. 

Mr.  PESSANO.  We  knew  nothing  about  that  up  to  that  time — that 
we  would  not  be  permitted.  When  the  Shipping  Board  itself -said 
to  us,  "  We  have  no  further  business  to  give  you,"  we  said  to  them, 
"We  will  be  out  of  a  job,  and  we  will  need  steel  to  lay  new  keels 
along  about  in  May." 

Mr.  HURLEY.  How  may  new  ways  did  you  put  in  your  yard  ? 

Mr.  PESSANO.  We  just  about  doubled  up.  We  added  five  new 
ways. 

Mr.  HURLEY.  How  many  ways  have  you  got  altogether,  ten  ? 

Mr.  PESSAXO.  We  have  eleven. 

Mr.  HURLEY.  So  that  the  war  ways  are  five.  Your  old  ways  were 
six? 

Mr.  PESSANO.  Yes. 

Mr.  HURLEY.  You  spent  two  and  one-half  million  dollars  for  five 
ways  and  machinery  8 

Mr.  PESSANO.  Not  for  five  ways,  but  for  the  necessaries.  We  had 
our  engine  plant  and  everything  that  went  with  it. 

Mr.  HURLEY.  That  is  the  amount  of  money  you  spent  for  war 
purposes  ? 

Mr.  PESSANO.  The  money  we  spent  for  war  purposes  was  two  and 
one-half  million  dollars,  and  we  see  no  way  of  getting  that  back 
unless  we  are  reimbursed  through  commercial  contracts  which  will 
give  us  a  fair  price.  If  we  are  not  to  get  these  commercial  contracts, 
that  is  all  scrap  to  us,  and  we  would  have  never  done  it,  Mr.  Hurley. 
Mr.  Donald  knows  that,  and  Commander  Ackerson  knows  it.  We 
would  not  have  spent  that  money  if  it  had  not  been  for  certain 
assurances  given  us  in  the  event  that  we  got  into  the  game  and  just 
doubled  our  output,  in  other  words,  gave  you  just  double  the  ton- 
nage we  had  previously  agreed  to  give  you  at  a  reduced  price. 
Otherwise  it  certainly  would  not  have  been  the  part  of  business  wis- 
dom to  jump  in.  It  was  on  the  request  of  Mr.  Schwab.  We  were 
urged  as  were  all  the  builders — "  man  to  man."  We  were  urged  to 
get  in  and  build  these  ships.  Of  course,  it  is  true — it  may  be  said 
truthfully,  in  other  cases  and  in  the  case  of  every  other  shipbuilder, 
excepting  the  company  I  am  representing,  and  for  whom  I  am 
speaking,  companies  were  allowed  if  I  recollect,  about  two-thirds  of 


10 

their  total  cost  of  plant  improvements,  but  in  the  case  of  the  Great 
Lakes  Engineering  Co.,  while  it  was  offered  to  us,  we  said :  "  Under 
the  circumstances  we  will  contribute  all  that  money."  Our  stock- 
holders had  to  go  down  in  their  pockets  and  pay  that  money.  That 
money  came  out  of  pre-war  contracts.  We  have  not  made  any 
money  yet,  because  the  first  contracts,  the  present  contracts,  are 
the  only  contracts  we  have  had.  We  have  not  completed  them  yet. 
I  do  not  know  what  the  cost  will  be.  We  do  know,  however,  that 
our  costs  are  running  very  much  higher. 

Mr.  HURLEY.  Now? 

Mr.  PESSANO.  Yes,  sir. 

Mr.  HURLEY.  Not  as  high  as  they  were  during  the  war:  you  have 
increased  efficiency. 

Mr.  PESSANO.  Yes ;  except,  if  you  count  out  overtime  work- 
Mr.  HURLEY.  That  is  an  important  part  of  the  cost. 

Mr.  PESSANO.  You  pay  for  that. 

Mr.  HURLEY.  Do  I  understand  that  it  is  costing  you  more  ? 

Mr.  PESSANO.  Yes,  sir. 

(Mr.  Hurley  left  the  meeting  at  this  point.) 

Mr.  STEVENS.  As  Mr.  Hurley  outlined  and  as  I  suggested  in  the 
few  remarks  I  made,  the  board  feels  that  there  is  some  possibility  in 
view  of  the  desire  on  the  part  of  Congress  to  reduce  expenditures 
and  cut  off  war  expenditures,  that  there  is  a  possibility  and  perhaps 
a  probability  that  Congress  will  refuse  to  appropriate  the  money 
necessary  to  complete  ships  the  keels  of  which  have  not  yet  been 
laid  down,  and  it  will  certainly  greatly  strengthen  the  board's  posi- 
tion if  it  is  able  to  report  to  Congress  that  the  readjustment  of  these 
contracts  has  been  taken  up  and  some  readjustments  and  reductions 
are  possible.  I  would  like  to  ask  Mr.  Pessano  if  he  thinks  it  is  pos- 
.sible  for  shipbuilding  companies  on  the  Great  Lakes  to  make  any 
proposals  for  the  ships  which  are  not  yet  laid  down,  which  will  reduce 
the  cost  of  these  ships. 

Mr.  PESSANO.  Mr.  Stevens,  I  can  not  speak  for  the  shipbuilders 
on  the  lakes.  We  had  no  intimation  of  what  was  to  come  before 
this  meeting,  and  the  shipbuilders  have  therefore  not  conferred, 
but  I  can  say  to  you  they  had  already  reduced  their  prices  when 
they  took  their  last  contracts.  They  reduced  their  prices  then,  and 
in  our  special  case  it  is  still  further  reduced  by  the  fact  that  we 
spent  all  that  money — $2,500,000.  We  just  doubled  our  capacity  in 
1919,  which  I  already  said  we  were  doing,  and  were  running  six 
months  ahead  of  our  schedule,  and  I  would  say  that  that  would  be 
a  matter  that  would  have  to  be  well  considered  by  the  lake  builders, 
but,  speaking  for  myself,  I  see  no  possibility  of  our  reducing  our 
figures  still  further  without  endangering  our  own  conditions.  We 
have  no  real  data  before  us  yet,  and  will  not  have  until  these  ships 
are  completed,  but  we  do  know  our  costs  are  daily  running  higher. 

Mr.  STEVENS.  Higher  now  than  during  the  war  ? 

Mr.  PESSANO.  That  may  sound  strange  to  you 

Mr.  STEVENS.  It  does. 

Mr.  PESSANO.  In  the  first  place,  eliminate  the  overtime  business. 
That  was  an  extraordinary  war-time  condition,  and  did  not  concern 
us,  because  the  Shipping  Board  was  paying  it.  I  am  speaking 
of  the  basic  contracts.  We  are  surrounded  by  conditions  today,  due 


11 

to  more  exacting  instructions,  and  due  to  different  annoying  things — 
I  will  put  it  that  way — that  come  up  from  day  to  day,  which  causes 
us  a  very  large  amount  of  expense,  where  we  have  to  do  this  and 
do  that  and  do  the  other  thing,  all  of  which  we  would  not  commer- 
cially be  subjected  to,  and  all  of  which  we  were  largely  not  sub- 
jected to  during  the  war.  I  can  appreciate  the  feeling  of  the  Fleet 
Corporation  and  the  sentiment  of  the  technical  department,  and 
their  desire  to  have  these  ships,  now  that  there  is  not  such  a  great  rush 
to  have  them,  built  more  exactly  in  line  with  the  specifications,  and 
there  are  some  details  which  were  not  considered  in  the  specifica- 
tions, not  even  dreamed  of,  all  of  which  we  have  acquiesced  in,  and 
in  a  great  many  instances  allowed  without  asking  recompense.  When 
you  take  that  into  consideration,  with  respect  to  our  own  com- 
pany, I  see  no  way  of  reducing  that  which  has  already  been  heavily 
reduced. 

The  labor  question,  of  course,  is  another  question.  We  have  taken 
the  position  from  the  beginning  that  we  should  go  on  and  pay  the 
same  wages,  make  no  attempt  to  sidestep  or  go  around  in  any  way, 
but  to  maintain  the  wages  set  up  by  the  Macy  scale,  and  we  intend 
to  do  it.  We  do  know,"however,  that  there  is  a  very  strong  feeling 
among  the  men  with  respect  to  the  uncertainty  of  the  whole  situa- 
tion. That  feeling  has  been  brought  about  unfortunately,  more  or 
less,  by  the  published  statements  put  out  through  the  press  over  the, 
entire "  country  to  the  effect  that  there  were  going  to  be  cancella- 
tions throughout  the  entire  country.  It  has  the  labor  element 
stirred  to  the  limit,  and  the  result  is — if  you  knew  labor  as  I  do 
you  will  know — when  such  a  feeling  gets  among  them  that  your 
efficiency  suffers,  and  that  is  what  is  costing  money — lack  of  effi- 
ciency. Regardless  of  all  we  can  do  to  bring  up  the  efficiency,  all 
we,  can  do  to  bring  it  up  is  offset  by  the  public  statement  made  in 
the  press  with  respect  to  the  cancellations.  All  the  other  lake  ship- 
builders are  here,  Mr.  Stevens;  they  can  speak  for  themselves. 

Mr.  STEVENS.  It  certainly  would  be  the  best  thing  for  the  industry 
on  the  Great  Lakes  to  get  all  the  work  it  could,  ,and  continue  these 
contracts,  both  from  the  company's  point  of  view  and  labor's  point 
of  view,  but  with  the  possibility  of  not  having  money  to  finish  these 
contracts  which  are  not  yet  laid  down  it  seems  desirable,  to  say  the 
least,  that  the  companies  on  the  Great  Lakes  should  work  with  the 
Shipping  Board  in  every  possible  way  to  reduce  the  price  of  these 
ships.  Of  course,  if  it  absolutely  can  not  be  done  we  will  have 
to  so  report  to  Congress.  Who  else  is  here  representing  the  ship- 
builders on  the  Great  Lakes?  (Is  Mr.  Smith  of  the  American  Co. 
here?) 

Mr.  A.  G.  SMITH  (of  the  American  Shipbuilding  Co.).  I  would 
refer  that  matter  to  our  vice  president,  Mr.  Davidson. 

Mr.  KEIXEY  (of  the  American  Shipbuilding  Co.,)  Mr.  Davidson 
has  asked  me  to  speak.  I  can  only  say  that  Mr.  Farr,  the  president 
of  our  company,  is  in  Europe,  and  he  has  personally  attended,  not 
only  to  all  of  the  negotiations  connected  with  our  shipbuilding  con- 
tracts, but  has  personally  made  the  figures  on  which  these  contracts 
were  based.  In  his  absence  it  would  be  out  of  the  question  for  those 
now  in  charge  of  the  company  to  even  intimate,  in  any  positive  way, 
what  we  could  do  or  would  be  able  to  do.  Mr.  Farr  is  expected  to 


12 

sail  for  this  country  very  shortly.  We  expect  him  probably  before 
any  definite  action  will  be  necessary,  and  I  feel — I  am  quite  sure — 
from  some  conversations  I  have  had  with  him  before  he  left,  it  would 
be  his  disposition  to  cooperate  in  any  way  possible  with  the  board 
in  making  any  savings  which  are  in  the  range  of  human  possibility. 
We  have  succeeded  in  increasing  very  largely  the  efficiency  of  our 
plant  and  in  some  ways  have  even  surprised  ourselves  in  that  respect. 
You  are  familiar,  I  believe,  with  the  form  of  our  present  con- 
tracts, and  they  make  it  certain  the  board  will  get  the  benefit  of  every 
possible  economy  we  can  put  into  effect.  As  to  definite  figures,  I 
must  ask  the  board  for  time  enough  to  consult  with  Mr.  Farr  as 
soon  as  he  returns,  and  I  will  be  very  glad  to  take  it  up  with  you 
again,  and  I  hope  it  will  not  be  too  late  for  your  conference  with 
Congress.  I  assure  you  Mr.  Farr  will  give  it  his  attention  as  soon 
as  he  lands. 

Mr.  STEVENS.  Of  course,  we  did  not  expect  to  arrive  at  any  definite 
figure  here  to-day.  Is  it  costing  your  company  more  to  build  ships 
now  than  it  did  before  the  armistice  was  signed?  Do  you  find  the 
same  conditions  confronting  you  that  Mr.  Pessano  finds  ? 

Mr.  A.  G.  SMITH.  Our  costs  are  running  up,  due  to  a  great  many 
circumstances. 

Mr.  STEVENS.  You  say  costs  are  running  up  over  what  they  were 
before  the  armistice  ? 

Mr.  A.  G.  SMITH.  Yes ;  due  to  the  fact  that  a  number  of  the  items 
mentioned  by  Mr.  Pessano  enters  into  it,  and  another  one,  that  he 
failed  to  mention,  and  one  which  has  a  large  bearing  on  the  matter. 
The  fact  of  the  reduction  from  10  to  8  hours  brings  into  the  8-hour 
period  the  same  number  of  lapses  that  occurred  in  the  10-hour  period. 
We  have  the  same  period  of  stoppage  at  lunch  time  and  at  quitting 
time  in  the  8-hour  period  that  we  had  in  the  10-hour  period,  and 
this  gives  us  a  greater  percentage  of  loss  in  the  8-hour  period  than 
it  did  in  the  10-hour  period.  It  has  a  very  large  bearing  on  the 
increased  cost. 

Mr.  STEVENS.  Is  Mr.  Calder  here,  of  the  Toledo  Shipbuilding  Co.  ? 
Mr.  CALDER.  Mr.  Wilkinson,  our  president,  is  here.    He  will  speak 
for  us. 

Mr.  WILKINSON.  I  seem  to  be  called  in  here  very  frequently. 
Mr.  STEVENS.  You  come  voluntarily  sometimes. 
Mr.  WILKINSON.  Yes;  once  in  a  while.    Well,  I  think,  gentlemen, 
that  there  is  a  great  deal  to  say  about  this  matter.    We  have  had  no 
time  for  any  discussion  among  the  various  men  on  the  lakes,  because 
this  question  has  been  entirely  a  new  one,  and  we  had  no  idea  of 
getting  together.    There  is  no  doubt  but  that  we  should  get  together 
to  know  what  the  conditions  are. 

Now,  it  is  hardly  fair  to  assume  that  the  conditions  are  the  same  in 
our  plant,  and  that  the  same  conditions  could  prevail  in  all  plants.  I 
think  that  there  should  be  a  fairness  existing  between  the  board  and 
the  shipbuilders  on  the  lakes,  as  well  as  in  other  parts  of  the  country. 
Now,  there  are  concerns  that  began  early  to  increase  their  facilities 
to  assist  in  the  carrying  out  of  the  war  program.  There  were  others 
that  did  not  believe  they  were  in  a  position  to  extend,  either  finan- 
cially or  with  room  and  organization  and  various  other  reasons,  and 
did  not  attempt  to  increase  their  facilities  for  some  time  after  others 


13 

had  been  making  improvements  and  preparing  to  give  a  greater 
efficiency  and  a  greater  service  to  the  country.  In  the  case  of  our 
own  plan,  as  an  illustration,  we  were  hemmed  in  pretty  well  and, 
as  we  thought,  pretty  well  buttoned  up  with  the  one  unit  which  we 
had  at  Toledo.  Mr.  Schwab  and  Mr.  Piez  came  to  Cleveland  and 
urged  us  to  increase  our  capacity.  I  made  a  little  statement  at  the 
time  that  they  were  there,  rather  objecting  to  our  attempting  to  in- 
crease our  capacity  at  the  time,  and  was  quite  promptly  sat  down 
on  as  being  rather  unwilling  to  do  all  that  I  could  for  the  cause, 
which,  of  course,  always  touches  me  a  little,  and  finally  Mr.  Schwab 
and  Mr.  Piez  went  to  our  yard,  looked  the  situation  over,  and  they 
thought  we  could  do  something  more  than  we  were  doing  and  urged 
us  into  the  programs,  much  against  our  own  opinion  of  what  we  could 
carry  out  in  time  to  render  any  very  efficient  service  to  the  country. 

Mr.  STEVENS.  How  many  ways  did  you  have  originally  £ 

Mr.  WILKINSON.  We  had  four  ways  at  the  time ;  no ;  three  ways  at 
the  time,  and  we  built,  at  a  cost  of  $1,200,000,  three  more  ways  and  all 
the  various  developments  that  were  necessary,  and  which  are  not  quite 
finished  yet,  but  which  will  be  finished  probably  within  60  or  90 
days.  NOWT,  on  the  basis  of  the  contract  which  we  signed,  we  made 
an  investment  of  $1,200,000,  of  which  a  percentage  was  to  be  given 
us  as  outlined  in  the  contract  which  we  took. 

Mr.  STEVENS.  What.do  you  mean  by  that,  a  percentage  of  the  cost 
of  the  ways? 

Mr.  WILKINSON.  Yes;  there  was  an  understanding  in  all  these 
contracts  that,  if  we  invested  a  certain  amount  of  money,  about  two- 
thirds  of  it  should  be  considered  as  a  part  of  the  cost  of  the 
proposition. 

Mr.  STEVENS.  Did  you  have  a  flat  sum? 

Mr.  WILKINSON.  Yes;  they  were  all  flat  sums.  Everyone  of  the 
Great  Lakes  contracts  is  a  flat-sum  contract. 

Mr.  STEVENS.  That  sum  was  large  enough  and  was  supposed  to 
cover  a  part  of  the  cost? 

Mr.  WILKINSON.  Yes. 

Mr.  STEVENS.  How  many  contracts  did  you  have? 

Mr.  WILKINSON.  We  had  a  contract  for  16  vessels,  and  we  were 
to  put  in  $600.000.  We  agreed  to  put  in  $600,000.  Now,  when  we 
started  with  the  $600,000,  we  were  no  better  off.  We  could  not 
build  any  more  boats  with  the  $600,000  in  there,  than  we  could  if 
it  had  not  been  put  in.  It  was  necessary  to  make  a  complete  unit. 

We  had  to^have  the  power  and  the  machinery  and  the  punch  shed 
and  everything.  The  capacity  had  to  be  balanced  up  in  order  to  get 
the  use  of  the  ways.  The  balancing  of  the  plant  required  an  ex- 
penditure of  $1,200,000. 

Now  I  propose  to  take  a  little  different  view  from  anyone  in 
this  room  on  this  question.  In  so  far  as  a  reasonable  profit,  and  in 
so  far  as  our  expenditures  made  in  this  investment,  and  the  necessary 
completion  of  contracts,  to  take  care  of  this  proposition,  I  believe 
it  to  be  not  only  legally  but  morally  right  that  we  be  protected 
to  the  extreme.  Such  business  as  is  not  necessary  to  the  carrying 
on  and  completing  of  this  program  with  a  fair  return  to  the  men 
in  the  business,  could  and  should,  I  believe,  be  subject  to  a  reason- 
able competitive  basis,  and  a  reasonable  adjustment  made  if  neces- 


14 

sary  with  the  Shipping  Board.  We  do  that  in  law;  we  do  that  in 
various  lines  of  industry.  It  has  been  the  usual  recent  business 
method  of  trying  to  take  care  of  extraordinary  conditions,  and  these 
are  extraordinary  conditions.  They  are  not  the  usual  business  con- 
ditions. 

Now,  I  do  not  care  what  anybody  else  does,  and  I  do  not  care 
what  anybody  else's  contract  is.  So  far  as  I  am  concerned,  and  so 
far  as  my  company  is  concerned,  we  would  be  willing  to  make  any 
reasonable  business  deal  that  is  right  and  just,  by  which  we  are 
made  good  and  safe  on  our  proposition  for  all  business  that  comes 

in  the  commercial  end  of  the  business 

Mr.  STEVENS.  What  do  you  mean  by  that? 

Mr.  WILKINSON.  I  mean  that  in  the  case  of  any  contracts  that  are 
not  necessary  for  the  amount  of  investment  we  have  made  for  the 
purpose  of  assistance  of  the  Government,  but  which  we  could  not 
get  out  of,  we  would  consider  these  contracts  upon  some  basis  of 
adjustment,  the  same  condition  applying  with  the  Government  that 
would  apply  with  a  customer  to  whom  we  went  out  to  obtain  that 
business.  Upon  that  basis  I  would  be  willing  to  sit  down  with  the 
board  as  an  individual  and  adjust  that  question  without  involving 
or  implicating  anybody  else  in  the  business. 

I  do  not  care  what  the  other  fellow  says.  It  is  a  question  of  what 
I  do  myself.  I  do  not  care  what  the  other  fellow's  views  are;  these 
are  my  views.  As  president  of  this-  concern,  I  am  responsible  to  my 
stockholders  for  the  policy  I  pursue,  a,nd  I  will  be  held  accountable 
to  them  for  the  policy  I  pursue.  Outside  of  that  I  do  not  care  any- 
thing about  compensation  or  conditions  or  what  not.  There  is  a 
reasonable  condition  under  which  I  am  willing  to  do  my  part  to 
adjust  any  contracts  with  the  Government  or  anyone  else  upon  an 
equitable  basis  that  arises  out  of  an  extraordinary  condition,  and  that 
is  the  feeling  we  have  in  Toledo. 

Now,  as  to  our  suffering  for  something  which  no  one  is  to  blame 
for — I  was  fool  enough  to  think  that  the  war  would  last  two  or  three 
years.  God  help  us,  I  am  glad  it  did  not  last  any  longer,  but  it  was 
a  condition  that  no  one  could  foretell,  and  while  we  made  fools  of 
ourselves — and  while  I  am  willing  to  say  to  those  around  here  who 
went  in  on  this  on  the  advice  of  various  people — that  about  50  per 
cent  of  all  the  plants  are  probably  going  into  the  hands  of  receivers, 
and  we  will  have  to  make  some  kind  of  an  organization  to  help  our- 
selves out — it  seems  to  me  that  this  is  a  part  of  the  suffering  the  busi- 
ness men  will  have  to  take,  the  same  as  the  boys  who  paid  the  price 
and  stayed  over  in  the  fields  and  are  buried  on  the  other  side.  Now, 
that  our  Government  here  at  home,  and  our  Congress  and  our  Senate, 
should  have  no  sense  of  appreciation  of  what  may  or  may  not  have 
been  done  by  the  men  in  the  game,  and  that  it  should  not  be  considered 
any  part  of  the  war  cost,  and  that  the  great  losses  sustained  by  many 
of  these  shipbuilding  plants  should  not  be  of  any  moment  to  Con- 
gress or  Senate,  that  is  something  I  fail  to  see. 

I  know  a  man  who  put  $1,000,000  in  and  borrowed  $2,000,000 
more  and  he  has  lost  his  $3,000,000".  Nobody  is  going  to  reimburse  him 
for  that  money.  The  lake  situation  was  an  extraordinary  situation. 
It  had,  perhaps,  the  greatest  efficiency  for  small  boats  of  any  place, 
which  was  proven  by  the  number  of  rivets  driven  and  the  accom- 


15 

plishments  made.  Naturally,  we  did  not  go  through  as  many 
vicissitudes  as  the  man  on  the  Atlantic  coast  who  built  new  plants. 
He  did  not  have  all  the  efficient  conditions  and  he  did  not  have  our 
opportunities.  We  should  not  be  penalized  for  that.  We  should  be 
given  a  reasonable  compensation  for  the  condition  in  which  we  are 
in,  because  there  will  be  a  great  deal  of  money  spent  by  this  board 
and  by  the  Government  where  there  was  no  efficiency,  and  no  prac- 
tical results  will  come  back  to  aid  the  great  cause  for  which  we 
fought. 

Now,  I  do  not  believe  that  you  can  make  a  rule  that  will  apply  to 
all.  I  have  wanted  to  say  something  at  various  times,  and  I  was 
asked  to-day  to  speak  plainly,  and  I  am  willing  to  do  it. 

Mr.  STEVENS.  That  is  what  we  want. 

Mr.  WILKINSON.  I  went  out  of  this  office,  or  an  adjoining  office 
here,  with  a  contract  in  my  pocket,  signed  at  10  o'clock  in  the  morn- 
ing for  eight  ships.  I  saw  an  old  man,  nearly  80  years  old,  in  the 
afternoon,  who  has  signed  a  contract  for  six  ships  for  $200,000  less 
per  ship ;  signed  a  contract  with  the  same  man,  and  under  the  same 
conditions.  Now,  I  will  tell  you,  I  said  then,  and  I  say  now,  that 
that  did  not  look  good  to  me,  and  it  does  not  look  good  to  me  yet. 
Because  one  man  insists  upon  receiving  one  price  for  his  contract 
and  his  competitor  a  few  miles  away  shall  take  one  from  the  same 
man  for  $200,000  less,  because  re  does  not  know  any  better  and, 
perhaps,  does  not  know  his  own  costs,  and  so  forth,  brings  on  a  con- 
dition, Mr.  Stevens,  by  which  it  is  pretty  hard  to  say  that  he  must 
make  exactly  the  same  conditions  in  the  readjustment  of  his  contract 
and  his  building  program  that  his  competitor  makes  who  may  have 
had  an  entirely  different  proposition.  There  are  men  in  this  room 
who  have  taken  about  $200,000  more  for  ships  than  I  ever  got  out  of 
a  ship  in  Toledo,  and  I  got  $200,000  more  a  ship  than  other  men  got 
out  of  the  ship  for  the  same  kind,  the  same  dimensions  and  the  same 
program. 

Mr.  STEVENS.  You  mean  there  was  a  difference  of  $400,000  on  some 
of  the  contracts  let  on  the  lakes  ? 

Mr.  WILKINSON.  You  heard  here  that  the  prices  dropped  from 
$225  to  $190  a  ton.  It  depended  a  little  on  when  you  got  your  con- 
tract. There  are  men  who  made  lots  of  profit  on  this  business  earlier 
in  the  game ;  not  later.  On  a  rising  market,  before  it  was  up,  not  on 
the  market  after  it  was  up.  The  earlier  contracts  that  were  taken, 
before  the  wage  had  reached  its  maximum  and  before  conditions 
were  established  made  an  entirely  different  condition  from  that 
which  has  prevailed  in  the  past  12  months.  Only  just  one  year  ago 
we  began  making  the  first  money  that  we  made  in  Toledo  in  five 
years,  and  we  lost,  the  year  before,  a  considerable  amount  of  money, 
so  that  we  had  to  drop  our  dividends.  Now,  we  come  in  here  with 
a  contract,  a  supposedly  high-priced  contract  with  a  $1,200,000  build- 
ing program  attached  to  it  under  which  we  have  been  able  to  build 
a  few  of  the  vessels  and  pay  a  part  of  that  improvement. 

Now,  I  am  willing  to  sit-down  with  this  board  upon  any  basis  of 
equity  and  justire  and  judgment  and  do  the  absolutely  fair  thing 
between  man  and  man  on  any  contract  that  I  have  taken  with  this 
board  for  the  Toledo  Shipbuilding  Co.,  but  there  are  a  great  many 
things  that  ought  to  be  taken  into  consideration,  such  things  as  Mr. 


16 

Pessana  has  mentioned.  If  one  concern  invested  money  and  re- 
ceived nothing  from  the  Government  they  should  receive  a  consid- 
eration for  that.  If  another  concern  received  two  or  three  or  four 
million  dollars  from  the  Government,  that  should  be  taken  into  con- 
sideration. The  contract  and  specific  conditions  should  be  also  taken 
into  consideration  in  the  readjustment,  or  the  same  thing  will  pre- 
vail that  is  prevailing  on  the  Atlantic  coast  and  all  over  the  country 
and  will  mean  chaos,  which  should  be  avoided  if  possible  by  the 
Shipping  Board  and  the  Government,  and  I  think  that  is  the  aim  and 
purpose  not  only  of  this  meeting,  but  of  the  work  going  on  in  the 
Shipping  Board.  But  I  do  not  believe  it  is  possible  to  sit  down  and 
say  how  much  per  ton  everybody  could  build  their  ships  for  and 
what  price  per  ton  will  be  the  price  of  ships  everywhere  under  all 
conditions.  I  think  you  will  all  agree  with  me  that  it  is  not  the 
purpose  of  the  Shipping  Board  to  give  many  more  vessels  to  the 
Great  Lakes.  I  think  you  will  all  agree  that  that  is  true.  They 
have  an  enormous  program  of  expenditures  and  the  greatest  service 
returned  by  any  particular  department  of  the  shipbuilding  business, 
so  that  I  think  it  is  vital  to  the 

(Mr.  Hurley  reentered  the  meeting  at  this  point.) 

Mr.  WILKINSON  (continuing) — adjustment  of  this  that  we  get  at 
a  fair  basis  as  between  the  various  interests  and  not  attempt  to 
classify  them  all  and  put  them  all  in  one  category  and  assume  that 
the  same  conditions  prevail  everywhere,  because  they  do  not,  and 
with  that  qualification  I  say  to  you  that  at  all  times  I  am  willing  to 
sit  down  upon  any  unfinished  business  or  business  that  is  yet  to  be 
completed  and  make  any  adjustment  that  may  be  right  as  between 
the  Shipping  Board  and  the  shipbuilding  plants. 

Mr.  STEVENS.  I  think  Mr.  Wilkinson's  remarks  have  been  very 
helpful,  and  I  can  assure  him  there  has  been  no  plan  or  purpose  here 
to  put  everybody  in  the  same  box  and  make  a  uniform  rule.  Any 
revisions  will  have  to  be  made  in  the  light  of  the  circumstances  sur- 
rounding each  contract. 

Mr.  HURLEY.  We  are  glad  to  get  your  point  of  view,  Mr.  Wilkin- 
son, because  that  is  what  we  are  here  for — to  get  individual  points  of 
view.  Of  course,  there  was  one  disadvantage  on  the  Great  Lakes, 
and  that  was  that  they  were  so  efficient  that  they  built  too  many  ships 
for  peace  times. 

Mr.  WILKINSON.  I  am  sorry  you  did  not  get  all  my  remarks.  I 
recognized  that  you  did  not  intend  to  extend  your  operation  of  these 
passenger  steamers.  It  looks  to  me  as  if  this  was  the  final  call  and 
that  you  are  saying  to  the  Great  Lakes  builders,  "  Now,  of  course,  we 
are  through  with  you.  We  have  to  settle  up.  What  will  you  take  ?  " 

Mr.  HURLEY.  We  are  trying  to  take  the  problem  as  a  whole — the 
Atlantic  coast  and  the  Great  Lakes,  and  the  Pacific  and  the  Gulf — 
and  we  realize  that  the  ships  that  were  built  on  the  Great  Lakes  were 
badly  needed  during  the  war.  We  needed  them  as  badly  as  we 
needed  those  built  on  the  Atlantic  coast  and  the  Pacific  and  Gulf. 
They  were  mighty  welcome  and  came  in  very,  very  handy.  It  seems 
to  me,  in  justifying  our  position,  and  continuing  to  build  ships  under 
peace  conditions  into  1920,  and  the  last  half  of  1919,  and  asking 
Congress  for  additional  appropriation,  we  realize  we  can  not  dispose 
of  the  Great  Lakes  ships  as  readily  as  we  can  some  of  the  others,  and 


17 

they  can  not  go  into  the  trades  we  are  trying  to  work  out  that  some 
of  the  other  ships  can  go  into. 

Mr.  WILKINSON.  Just  a  moment:  I  made  that  remark  to  Mr. 
Schwab  and  Mr.  Piez  at  the  lovely  luncheon  which  we  had  at  the 
Union  Club,  at  which  we  were  all  so  happy,  and  there  seemed  to  be 
no  disposition  to  take  into  consideration  the  fact  that  we  knew  that 
we  were  inland  seas.  I  tell  you  it  makes  a  difference  whether  you 
locate  your  10-story  flat  in  the  Great  Sahara  Desert  or  in  the  heart 
of  New  York  City.  The  rentals  are  different.  And  it  is  different  if 
you  put  in  three  or  four  million  dollars  in  extending  shipbuilding 
business.  It  is  a  home  business.  We  never  built  boats  for  the  ocean. 
We  built  simply  inland  sea  tonnage,  and  we  were  capacitated  to  take 
care  of  the  great  inland  seas,  and  that  was  performing  our  part  of 
the  work.  The  Toledo  Shipbuilding  Co.  should  never  have  doubled 
its  plant.  I  said  to  our  men  this  morning,  "  If  I  had  stood  with 
Charlie  Schwab,  instead  of  letting  him  bluff  me  over;  if  I  had  just 
stood  there  with  our  plant  where  it  was  and  taken  our  contracts  and 
built  all  the  boats  we  could  have  built,  we  would  have  given  you 
about  the  same  anyhow — one  a  month — if  I  had  stood  there  I  would 
be  all  right  now."  But,  now  I  am  just  finishing  up  that  program 
there  and  have  not  built  a  ship  with  it. 

Mr.  HURLEY.  Have  you  laid  keels? 

Mr.  WILKINSON.  We  have  laid  two  keels  on  the  first  program.  I 
am  perfectly  willing,  as  I  say,  to  make  reasonable  adjustment  on 
anything  that  is  right.  I  am  putting  all  my  cards  on  the  table.  I 
have  twice  the  capacity  at  Toledo  that  I  will  want  in  a  good  many 
years,  unless  a  canal  is  made  big  enough  to  let  us  become  competitors 
with  the  Atlantic  coast  shipbuilders,  and  I  won't  see  that  in  my  time, 
Mr.  Hurley.  Therefore,  I  consider  this  part  of  this  world  cost  and 
this  war  cost,  and  I  do  not  think  this  Government  should  criticize 
the  people  who  gave  almost  50  per  cent  of  the  needed  tonnage  at 
the  time,  and  at  the  expense  of  a  good  many  millions  of  dollars  of 
capacity  which  they  can  not  get  to  the  seas.  They  are  confined,  like 
a  man  who  has  gone  inland  and  built  his  capacity.  I  think  the  Gov- 
ernment should  take  that  into  consideration,  and  take  into  consid- 
eration the  conditions  which  confront  us,  that  we  are  not  open  to  the 
competition  of  the  world,  and  can  not  build  under  any  conditions 
for  competition.  We  realize  that  we  are  through.  What  we  will  get 
out  we  will  get.  If  I  can  read  the  signs  of  the  times,  I  think  there 
are  Atlantic  shipbuilding  companies  enough  down  here  to  take  care 
of  most  of  the  4,000-ton  boats.  I  think  these  gentlemen  will  see  that 
we  do  not  put  any  more  of  them  down  here  than  is  necessary. 

Mr.  HURLEY.  You  mentioned  the  fact  that  .you  did  not  think  the 
Government  should  criticize.  This  meeting  is  not  one  of  criticism. 

Mr.  WILKINSON.  There  is  another  question  I  did  not  treat  on.  It 
is  in  the  minds  of  every  man  here,  and  it  is  giving  everyone  much 
concern.  We  were  told  that  you  would  do  all  you  could  for  us  on  the 
amortization  of  this  additional  property,  but  you  could  not  assure  us 
that  we  would  not  be  called  upon  to  pay  the  Government,  providing 
they  arbitrarily  took  that  view  of  the  situation.  I  do  not  know 
whether  they  will  go  back  or  not  and  ask  us  to  take  the  cash  and  bond 
our  properties  to  pay  for  the  deductions  made  on  this  war  program, 
as  they  did  in  a  company  in  which  I  have  just  had  a  little  difficulty. 
121035—19 2 


18 

We  had  $2,600,000  of  bonuses  paid — everybody,  from  the  stenog- 
raphers up.  There  was  a  large  bonus,  but  it  was  very  widely  dis- 
tributed. None  was  taken  by  the  chairman,  if  you  please.  The 
Government  said,  "  That  is  a  nice  thing  to  do ;  splendid,  but  you 
must  pa}T  us  $1,300,000  of  it,  and  then  you  can  give  them  the  whole 
company  if  you  want  to,  but  you  can  not  charge  these  bonuses  into 
the  expense  of  the  business  until  after  you  have  paid  us  the  tax 
upon  it."  You  know  we  will  fight  a  little,  but  we  will  probably  lose. 

Mr.  HURLEY.  That  all  should  be  taken  into  consideration,  and 
when  any  adjustment  is  made  you  should  be  satisfied,  from  all  Gov- 
ernment agencies,  where  you  stand.  We  are  not  in  any  way  trying 
to  take  advantage  of  a  condition  which  we  all  know  is  very  uncertain, 
and  I  do  not  think  any  man  should  make  a  settlement  or  adjustment 
without  being  assured  by  the  Treasury  Department  and  by  the  Gov- 
erment  that  he  is  free  after  he  adjusts  his  claims  on  the  lines  mutually 
worked  out. 

Mr.  WILKINSON.  On  that  basis  I  think  a  good  many  million  dollars 
would  be  saved  by  this  corporation  and  the  shipping  industry.  I  am 
trying  to  protect  our  company,  in  the  remnants  of  our  last  contracts, 
so  that  when  a  man  comes  in  and  says :  "All  right,  we  do  not  care  what 
they  told  you,  you  have  to  pay  this  amount,"  I  do  not  want  to  make 
a  settlement  by  which  I  give  that  back  to  the  Shipping  Board,  and 
then  when  we  have  given  it  back  and  haven't  anything,  have  them 
come  in  and  have  to  give  it  to  them  out  of  cash  assets,  on  the 
ground  that  there  was  no  authority  for  that,  and  that  you  had  no 
right  and  we  would  have  to  pay  it. 

Mr.  STEVENS.  You  do  not  want  to  be  taxed  on  what  you  give  back? 

Mr.  WILKINS.  No. 

Mr.  HURLEY.  I  do  not  think  it  is  fair  to  the  shipbuilding  industry 
as  a  whole  to  have  one  branch  of  the  Government  urging  them  to 
get  their  prices  down  in  order  to  stabilize  the  industry  as  a  whole, 
thinking  of  the  future  of  the  industry  while  other  branches  of  the 
Government  jump  on  them,  and  take  everything  away  from  them. 
That  can  not  be  done.  Everything  will  have  to  be  clarified.  We 
first  must  think  of  the  industry  as  a  whole  and  every  branch  of  the 
Government  should  cooperate  with  the  Shipping  Board  in  working 
that  problem  out,  and  I  want  to  say  that  every  member  of  the  board 
here  is  heartily  in  favor  of  that  sort  of  cooperation.  How  many 
of  the  Great  Lakes  shipbuilding  concerns  have  we  heard  from? 

Mr.  ACKERSON.  Mr.  Pessano  and  Mr.  Wilkinson. 

Mr.  HURLEY.  I  would  like  to  hear  from  the  other  gentlemen. 

Mr.  ACKERSON.  Also  Mr.  Smith. 

Mr.  WILKINSON.  Mr.  Smith  is  a  little  concerned  about  a  statement 
I  made  here.  I  said  we  had  two  keels  laid,  but  we  have  laid  keels 
for  six  in  the  last  program.  There  have  been  two  already  launched, 
and  we  have  laid  keels  for  six  of  the  eight  in  the  last  program.  We 
had  sixteen. 

Mr.  STEVENS.  You  had  sixteen.  You  have  eight  laid.  There 
are  eight  yet  for  which  the  keels  have  not  yet  been  laid. 

Mr.  WILKINSON.  We  will  lay  the  keels  for  the  next  one  in  a  few 
days. 

Mr.  HURLEY.  I  would  like  to  ask  Mr.  Pessano  and  the  other  gen- 
tlemen on  the  Great  Lakes  the  amount  of  the  investment  they  put 
in ;  that  is,  their  own  money  that  they  put  in  ? 


19 

Mr.  PESSANO.  A  little  over  two  and  one-half  millions. 

Mr.  WILKINSON.  $1,200,000. 

Mr.  ACKERSON.  That  wasn't  your  own  money  ? 

Mr.  WILKINSON.  WTell,  we  have  $800,000— there  was  $800,000  of 
our  own  money ;  in  other  words,  the  Shipping  Board  agreed  that  we 
should  have  four,  so  we  put  in  eight  of  our  own  money. 

Mr.  ACKERSON.  We  agreed  to  give  you  at  least  two-thirds,  as  I 
recall  it. 

Mr.  WILKINSON.  That  was  the  amount  in  the  contract. 

Mr.  HURLEY.  I  want  to  find  out  what  you  have  put  in  for  war 
purposes. 

Mr.  WILKINSON.  $800,000. 

Mr.  HURLEY.  And  the  Government  put  in 

Mr.  WILKINSON.  $400,000. 

Mr.  PESSANO.  We  have  put  in  two  and  one-half  million  dollars  of 
our  own  money. 

Mr.  HURLEY.  And  the  Government? 

Mr.  PESSANO.  None. 

Mr.  HURLEY.  All  right ;  what  about  the  other  Great  Lakes  yards — 
the  American  Shipbuilding  Co.? 

Mr.  A.  G.  SMITH.  The  American  Shipbuilding  Co.  has  a  contract 
which  takes  care  of  that.  We  put  in  yard  extensions  something  over 
$7,000,000. 

Mr.  HURLEY.  Of  your  own  money  ? 

Mr.  A.  G.  SMITH.  Our  own  money,  up  to  date. 

Mr.  HURLEY.  For  war  extension? 

Mr.  A.  G.  SMITH.  War  extension. 

Mr.  ACKERSON.  How  much  did  your  contracts  provide  in  addition 
to  the  base  price,  to  take  care  of  that  ? 

Mr.  A.  G.  SMITH.  We  have  no  base  price.  Our  present  contract  is 
a  modification  of  the  original  contract. 

Mr.  ACKERSON.  It  is  taken  over  on  the  cost-plus? 

Mr.  HURLEY.  I  am  trying  to  get  the  investment  in  the  Great  Lakes 
yards. 

Mr.  A.  G.  SMITH.  Our  yard  extension  amounts  to  something  over 
seven  millions.  When  it  is  completed  it  will  be  nearly  seven  and  one- 
half  millions. 

Mr.  C.  W.  STINER  (Saginaw  Shipbuilding  Co.).  We  have  put  in 
over  $1,000,000. 

Mr.  HURLEY.  For  war  purposes? 

Mr.  STINER.  For  war  purposes. 

Mr.  HURLEY.  What  other  yards? 

Mr.  CHARLES  C.  WEST  (of  the  Manitowoc  Shipbuilding  Co.).  We 
have  put  in  a  million  dollars  of  our  own  money,  and  of  that  $264,000 
is  applicable  to  the  Schwab  contract,  provided  we  are  allowed  to  com- 
plete it. 

Mr.  HURLEY.  What  do  you  mean? 

Mr.  WEST.  The  last  12  ships. 

Mr.  HURLEY.  How  much  money  did  you  have  in  your  yard  before 
you  put  this  in? 

Mr.  WEST.  About  a  million  dollars. 

Mr.  HURLEY.  And  you  have  put  in  an  additional 

Mr.  WEST.  Million  and  a  half. 


20 

Mr.  WILKINSON.  Upon  the  completion  of  these  ships  we  were  to 
receive  $400,000.  The  agreement,  first,  was  this :  Two-thirds  of  this 
amounted  to  $400,000,  but  we  had  to  put  $1,200,000  in.  We  found 
there  was  no  use  of  putting  that  in  unless  we  built  everything  that 
went  with  it.  We  had  to  increase  the  unit.  If  we  increased  the 
capacity,  we  had  to  increase  the  power  and  everything  accordingly. 

Mr.  MCCLELLAN.  We  had  in  about  $3,000,000. 

Mr.  HURLEY.  American  Shipbuilding  Co. — what  did  you  have  ? 

Mr.  A.  G.  SMITH.  You  mean  our  original  investment  in  plants? 

Mr.  HURLEY.  Yes. 

Mr.  A.  G.  SMITH.  That  is  a  pretty  hard  question  to  answer. 
Roughly — I  am  guessing  about  this  thing — roughly,  I  would  say 
that  the  original  investment  was  in  the  neighborhood  of  $15,000,000 
before  the  war.  That  is  a  very  rough  estimate. 

Mr.  PESSANO.  Mr.  Chairman,  may  I  offer  a  suggestion?  I  think 
what  you  have  in  mind  is  to  get  at  the  difference  in  contracts.  These 
contracts,  which  all  these  increases  in  plant  account  are  responsible 
for,  the  contract  given  by  Mr.  Schwab  and  Mr.  Piez  just  a  year  ago, 
as  Commander  Ackerson  will  remember,  these  contracts  were  written 
at  $800,000  as  a  base  price.  All  of  the  other  contracts  take  into  con- 
sideration an  allowance  of  $20,000  per  ship  for  plant  account.  That 
made  all  the  other  contracts  $820,000,  against  our  $800,000.  That 
was  allowed  for  plant  account,  as  stated  by  Mr.  Wilkinson;  about 
two-thirds  of  the  total  cost  of  it. 

Mr.  HURLEY.  That  covers  another  matter.  I  am  trying  to  get  the 
total  war  investment  in  the  Great  Lakes  yards. 

Mr.  MCCLELLAN.  We  originally  had  $1,100,000  in  our  plant.  We 
added  $900,000,  and  on  the  Schwab  contract  put  in  $1,700,000,  on 
which  we  were  allowed,  under  the  terms  of  contract,  $375,000. 

Mr.  HURLEY.  For  plant  expenses  ? 

Mr.  MCCLELLAN.  For  plant  expenses,  yes,  sir. 

Mr.  HURLEY.  The  actual  amount  you  have  put  in  is  how  much  ? 

Mr.  MCCLELLAN.  $2,600,000  for  war  purposes.  While  I  am  up  I 
would  like  to  correct  something  that  has  been  said  about  yards  being 
reimbursed  to  two-thirds  of  the  costs  on  these  last  contracts.  We 
were  reimbursed  for  $375,000  and  spent  $1,700,000. 

Mr.  B.  C.  COOKE.  (Of  the  Globe  Shipbuilding  Co.,  Superior,  Wis.). 
We  have  spent  about  $600,000  of  our  own  money. 

Mr.  HURLEY.  What  was  the  original  investment? 

Mr.  COOKE.  Our  plant  was  built  entirely  for  war  work.  When  the 
war  contracts  came  on  we  just  had  one  berth  and  contracted  for  two 
boats,  and  then  we  went  into  the  war  business  and  everything  from 
then  on  was  for  war  work.  We  took  10  boats  of  the  last  Schwab 
boats.  First,  we  took  five  and  were  allowed  $20,000  a  boat,  the  same  as 
the  others,  and  then  five  more  without  any  allowance  whatever.  Our 
plant  is  up  in  the  Northwest  there.  It  is*  built  on  a  swamp.  It  is  of 
temporary  nature.  Our  machine  shop  is  a  disgrace,  costly  of  opera- 
tion, because  we  have  to  do  things  quickly  and  get  out  boats  at  the 
same  time,  and  when  we  are  through  with  our  war  work,  the  plant 
has  to  be  scrapped  absolutely;  and  if  there  is  any  question  about 
that,  we  are  perfectly  willing  to  put  it  up  for  sale  to  the  highest 
bidder  to  establish  the  truth  of  that  remark.  That  is  the  position  we 
are  in.  We  want  to  meet  the  board  fairly  and  squarely  and  will  show 


21 

every  card  in  our  hands.  But,  as  I  look  at  it,  about  50  per  cent  of 
the  plants  on  the  Great  Lakes  have  got  to  quit  business  and  go  into 
the  hands  of  a  receiver.  There  is  no  use  for  them.  We  can  not  build 
ships  for  the  ocean  and  there  is  100  per  C3nt  more  capacity  upon  the 
lakes  than  necessary  for  local  business.  It  sems  to  me  we  have  sim- 
ply got  to  quit  business.  We  have  no  dry  dock  and  no  repair 
facilities,  and  our  plant  is  built  of  second-hand  timber.  It  is 
racking  itself  to  pieces.  The  ground  is  shaky,  and  since  I  have  been 
East  here,  part  of  the  power  plant — the  walls — fell  down. 

Mr.  HURLEY.  We  won't  have  any  trouble  with  you.  You  won't 
build  ships.  [Laughter.] 

Mr.  COOKE.  I  am  frank;  the  only  thing  that  saved  our  organiza- 
tion is  that  what  work  we  have  turned  out  has  been  good  work  and 
that  has  been  due  to  the  organization  and  not  to  the  plant.  When 
I  go  through  these  Atlantic  coast  plants,  it  makes  me  wonder  how  our 
men  could  turn  out  the  work. 

Mr.  HURLEY.  How  many  ships  have  you  built? 

Mr.  COOKE.  We  have  built  five  and  have  five  ready  to  go  out  this 
week. 

Mr.  HURLEY.  How  many  ways? 

Mr.  COOKE.  Five. 

Mr.  HURLEY.  How  many  more  keels  to  lay  ? 

Mr.  COOKE.  Only  five  more  to  lay,  and  we  slowed  up  our  program 
for  the  sake  of  the  others,  because  we  wanted  to  keep  our  men  work- 
ing as  long  as  we  could. 

Mr.  HURLEY.  You  have  $600,000  in  the  plant? 

Mr.  COOKE.  Yes,  sir. 

Mr.  HURLEY.  Did  the  Government  put  that  in? 

Mr.  COOKE.  No;  we  did.  The  Government  put  in  a  total  of 
$100,000  for  the  whole  thing. 

Mr.  HURLEY.  What  other  Great  Lake  yards  are  there? 

Mr.  PESSANO.  You  have  heard  them  all. 

Mr.  HURLEY.  I  would  like  to  take  up  some  of  the  other  yards,  and 
I  think  every  man  here  ought  to  have  an  apportunity  to  express  his 
views.  The  board  feels  that  we  will  all  profit  by  each  man  explain- 
ing his  own  conditions,  and  there  is  no  question  but  that  each  man 
must  have  a  different  treatment  from  the  others.  We  can  not  adopt 
any  general  rule  to  apply  to  all.  I  think  we  had  better  start  up  here 
at  this  end. 

Mr.  HENRY  R.  CARSE  (of  the  Submarine  Boat  Corporation).  I  rep- 
resent the  Submarine  Boat  Corporation  and  the  Newark  Bay  Ship- 
yard. We  were  the  first  people  who  brought  to  Gen.  Goethals  the  pos- 
sibilities of  constructing  in  large  quantities  cargo  vessels  from  com- 
mercial steel,  using  the  forces  of  the  bridge  and  tank  shops  of  the 
country  with  the  idea  of  fabricating  as  much  as  was  possible  in  the 
shops  as  far  west  as  the  Mississippi,  and  then  taking  the  full  force 
of  these  shops  to  assemble  the  material  on  the  Atlantic  seaboard.  As 
Gen.  Goethals  suggested,  all  our  calculations  were  made  on  the  basis 
of  flat  prices — we  to  provide  the  yards,  the  plant,  and  all  facilities. 
As  you  all  know,  certain  difficulties  arose  in  the  Shipping  Board,  and 
when  the  question  came  up  again  with  Admiral  Capps,  the  only  sub- 
ject discussed  by  him  with  us  was  on  the  cost-plus-fee  basis.  He  was 
not  interested  in  a  flat-price  contract,  and  he  insisted  upon  taking 


22 

over  the  lease  which  we  had  arranged  for  the  property  at  Newark 
Bay,  and  acquiring  the  plant  at  the  expense  of  the  Emergency  Fleet 
Corporation.  Of  course,  we  did  not  object  to  that  proposition,  as  it 
was  similar  in  every  respect  to  the  proposals  that  were  then  made 
during  the  summer  of  1917  to  the  American  International  Co.,  who 
proposed  the  yard  at  Hog  Island,  and  to  the  Merchants  Co.,  who  pro- 
posed an  extension  of  a  plant  that  they  then  had  at  Bristol,  Pa. 
These  contracts  were  signed  about  September  12,  13,  or  14, 1917. 

We  found  quite  a  few  difficulties  in  carrying  through  the  cost-plus- 
fee  agency  contract,  because  of  interference  with  our  management 
by  the  representatives  of  the  Emergency  Fleet  Corporation,  and 
Mr.  Hurley  will  remember  that  I  discussed  the  subject  with  him,  and 
he  requested  that  we  give  a  study  to  the  entire  subject  and  see  if  we 
could  not  make  a  proposal  of  taking  over  the  whole  proposition  on 
our  own  account. 

We  were  working  along  these  lines,  when  Director  General 
Schwab,  a  few  days  after  his  appointment,  called  at  the  yard  with 
Vice  President  Piez  and  Assistant  General  Manager  Bowles,  and 
they  brought  up  the  question  of  canceling  the  contracts  and  taking 
a  new  contract  on  a  flat  price,  at  the  price  stated  by  them.  The 
price  made  by  Admiral  Bowles  was  $966,000  per  vessel,  of  which 
$600,000  per  vessel  was  to  be  paid  to  the  Fleet  Corporation  as  rent 
for  the  yards.  Our  contract  of  September  was  based  on  an  esti- 
mated cost  of  $150  per  dead-weight  ton.  Our  vessels  were  then  being 
estimated  at  5,000  tons  dead- weight,  but  because  of  certain  changes 
made  in  the  vessels,  they  measure,  as  built,  5,350  dead- weight.  The 
estimated  basic  cost  was  $750,000,  of  which  $350,000  was  calculated 
to  be  the  cost  of  material,  and  that  covers  the  freight;  $200,000 
the  cost  of  labor,  $200,000  overhead,  in  which  was  included  the  cost 
of  doing  the  fabricating  work  at  the  bridge  and  tank  shops  through- 
out the  country.  We  always  calculated  that  these  shops  were  simply 
branches  of  our  plant.  The  revised  flat-price  figure  was  determined 
really  by  guess.  Sitting  around  the  table  on  April  24,  1918,  at 
luncheon,  we  guessed  that  the  cost  of  the  material  entering  into  the 
cost  of  the  vessel  would  be  $400,000'.  As  the  thing  worked  out,  it  was 
found  that  the  material  entering  into  that  vessel  will  cost  approxi- 
mately $440,000.  We  guessed  that  the  increase  provided  for  by  the 
schedule  of  labor  adjustment,  as  of  April  6,  1918,  was  an  increase  of 
40  per  cent  over  the  wage  scale  in  the  port  of  New  York  of  July,  1917 ; 
which  was  the  basis  of  our  original  contracts.  It  has  been  cal- 
culated by  our  auditors,  and  I  find  that  it  has  been  confirmed  by 
other  ship  yards,  that  the  wage  scale  of  April  6  was  an  increase  of 
43  to  44  per  cent  above  the  scale  of  July,  1917,  and  they  provided 
an  increase  of  15  per  cent  over  pur  overhead,  which  really  is  much 
less  than  it  actually  is,  so  that  instead  of  the  readjustment  in  1918 
to  the  flat-price  contract  adding  to  the  cost  of  the  vessels  to  the 
Fleet  Corporation  it  really  provided  for  a  very  substantial  decrease. 
That  price  was  determined  at  the  time  with  the  full  knowledge 
on  the  part  of  the  officials  of  the  Fleet  Corporation,  and  of  our- 
selves, that  the  cost  to  us  at  that  time  on  the  vessels  which  we 
were  erecting  was  very  largely  in  excess  of  that  contract  price, 
which  figures  at  $179  a  ton,  but  we  also  believed  that  we  could 
greatly  reduce  that  charge.  As  everybody  in  the  shipbuilding  busi- 


23 

ness  knows,  any  calculations  made  in  1917  as  to  what  they  were 
going  to  do  in  producing  ships  turned  out  absolutely  wrong.  There 
is  no  one  who  made  any  calculation  based  on  experience  or  judgment 
of  what  he  could  do  who  found  he  hit  anywhere  near  it. 

There  are  many  things  that  sometimes  we  do  not  like  to  go  into 
detail  about,  but  I  think  that  shipbuilders  instead  of  being  assisted 
by  many  of  the  governmental  boards  and  functions  were  hindered; 
many  of  the  rules  laid  down  hindered  instead  of  assisted  the  eco- 
nomical construction  of  ships.  The  rules  of  the  labor  adjustment 
board,  I  think,  every  one  found  to  be  very,  very  costly.  Some  of 
these  were  provided  for  by  the  Fleet  Corporation  undertaking  to 
assume  any  increase  in  cost  by  reason  of  rules  and  regulations  of 
such  boards. 

We  ran  along  during  1918 ;  we  were  doing  very  well  indeed,  when 
we  were  stopped  by  the  nondelivery  of  proper  machinery  for  our 
vessels.  We  were  hung  up  for  four  months,  while  the  Fleet  Corpora- 
tion were  endeavoring  with  the  contractors — they  having  comman- 
deered the  plant  of  the  Westinghouse  Co.,  who  were  doing  our  ma- 
chinery, and  ordered  our  men  out  of  the  Westinghouse  plant — to 
work  out  the  defects  that  had  developed  in  this  machinery.  We  had 
over  20  hulls  in  the  water  with  no  machinery.  We  were  running 
behind  half  a  million  dollars  a  month.  We  had  to  spend  a  very 
large  sum  of  money  above  that  which  we  were  receiving  for  the 
work  done,  so  that  it  was  necessary  for  us  to  slow  down  very  quickly, 
and  we  reduced  the  capacity  of  the  hulls  at  least  one-half.  Of  course 
we  could  not  reduce  the  overhead,  and  we  ran  along  until  that  ma- 
chinery was  put  in  proper  condition  and  since  that  time,  since  about 
March,  we  have  been  able  to  do  rather  effective  work,  and  to  increase 
the  efficiency  of  the  plant,  so  that  now  we  are  running  well  within 
our  contract  price,  and  unless  some  other  matters,  which  we  do  not 
foresee  now,  similar  to  matters  which  we  did  not  foresee  in  1917, 
may  arise,  we  believe  that  we  will  be  able  to  finish  our  contract 
rapidly,  and  with  some  profit,  but  the  profit  will  be  unknown  to  us 
until  the  contract  is  finished. 

Of  course  we  all  know  that  the  Newark  Bay  Shipyard  is  a  very 
large  yard.  We  have  28  ways,  and  we  have  about  13,000  men.  In 
order  to  attain  commercial  efficiency  in  a  yard  of  that  size,  it  is 
necessary  to  have  large  orders  ahead,  because  if  the  men  can  see  the 
end  of  the  job  with  nothing  new  in  sight,  they  will  disappear;  they 
will  be  looking  for  more  permanent  jobs,  and  if  that  should  happen 
our  costs  will  mount  again,  the  same  as  they  did  last  fall  when  we 
were  stopped  for  want  of  machinery.  We  have  launched  45  hulls. 
We  have  delivered  20  or  more.  We  have  delivered  3  or  4  ves- 
sels a  week  now  to  the  Shipping  Board,  and  the  others  are  in 
the  water.  The  hulls,  as  we  launch  them  now,  are  practically  com- 
plete, and  with  machinery  coming  along  in  proper  shape  we  calcu- 
late we  will  be  able  to  finish  equipping  a  ship  in  about  30  days. 
We  have  done  it  in  a  little  less.  In  addition  to  the  45  ships  launched, 
we  have  laid  28  additional  keels.  We  have  material  in  the  plant 
for  most  of  the  other  war  contracts  for  150  vessels.  The  150  ves- 
sels require,  I  believe,  about  270,000  tons  of  steel.  I  believe  we  have 
in  our  yard  about  225,000  tons  of  steel,  upon  which  one-quarter  of 
the  work  necessary  to  complete  the  ship  has  been  done  at  the  dif- 


24 

ferent  plants  throughout  the  country.  The  water  tube  boilers  we 
have  in  the  yard,  a  part  for  the  entire  150  vessels — we  have  the  en- 
tire boilers  for  120  vessels,  and  the  other  material  entering  into  the 
construction  of  the  ship  is  piled  up  in  our  yard  or  adjacent  thereto 
in  like  proportion. 

We  feel  that  we  made  the  adjustment  in  our  contract  a  year  ago 
which  Mr.  Hurley  is  now  discussing.  We  had  some  very  serious 
thoughts  during  last  fall  and  this  spring  as  to  where  we  were  going 
to  land  with  that  adjusted  contract.  The  executive  officers,  I  think, 
had  some  very  unhappy  moments,  but  we  have  finally  evolved  a 
system  of  doing  the  work  which,  if  we  can  continue,  we  believe  will 
bring  the  cost  of  erecting  these  vessels  down  to  a  commercial  basis 
where  we  can  compete  with  anybody  in  the  world.  I  am  not  saying 
this  in  any  bragging  manner — I  am  simply  stating  a  plain  fact, 
but  a  yard  of  that  size  requires  much  work,  or  else  it  can  not  be 
accomplished.  Your  overhead,  if  you  do  not  have  sufficient  work, 
would  simply  swamp  you.  Our  pay  roll  runs  over  a  half  million 
dollars  a  week.  We,  of  course,  all  understand  that  the  Newark  Bay 
Shipyard  is  owned  by  the  Emergency  Fleet  Corporation.  We  had 
made  a  lease  of  this  property  from  the  city  of  Newark  for  two 
years  with  an  option  of  renewal  months  before  we  had  any  con- 
tract. We  believed  that  the  need  of  the  country  for  cargo  vessels 
was  so  great  that  a  contract  would  come  to  us  eventually,  although 
there  were  many  delays  before  we  signed  a  contract.  We  had  to 
spend  or  had  obligated  ourselves  to  spend  a  half  million  dollars, 
and  the  day  the  contract  was  signed  500  tons  of  structural  steel  left 
Buffalo  and  was  in  the  yard  in  a  few  days,  and  that  was  one  reason 
why  we  managed  to  get  so  far  ahead  of  the  other  yards. 

Mr.  HURLEY.  How  much  money  has  the  Government  got  in  there? 

Mr.  CARSE.  The  Government,  I  believe,  has  between  15  and  16  mil- 
lion dollars  invested  in  the  plant.  The  appropriation  was  for  a  larger 
amount.  We  have  not  spent  the  entire  amount  appropriated,  and  we 
do  not  expect  to  spend  it.  We  have  tried  in  every  way  to  save  money. 
There  are  many  things  in  the  plant  which  are  there  because  they  were 
ordered  there  by  officials  of  the  Fleet  Corporation,  which  we  do  not 
consider  necessary.  The  plant  costs  a  great  deal  more  than  the  orig- 
inal calculation,  because  of  the  nature  of  the  soil.  The  engineers  of 
the  city  of  Newark  told  us  the  soil  was  so  firm  that  any  buildings 
could  be  erected  on  it,  but  when  we  commenced  to  lay  our  railroad 
tracks  in  warm  weather  we  found  they  were  disappearing,  so  that 
in  order  to  get  any  firm  soil  we  have  placed  on  120  acres  over  500,000 
tons  of  cinders,  about  4  feet  of  cinders.  In  building  our  ways,  because 
of  the  nature  of  the  bottom,  and  the  failure  of  the  Army  to  do  the 
dredging  in  the  time  calculated,  so  that  the  ways  had  to  be  built 
outboard,  they  cost  a  great  deal  more  money,  and  then,  there  are 
certain  buildings  that  we  hardly  consider  necessary  to  have  there. 

Mr.  W.  SCOTT  PROSKEY  (of  the  Atlantic  Corporation).  This  is  my 
first  appearance  at  a  conference  of  this  kind,  and  I  was  wondering 
if  you  would  take  it  in  good  part  if  the  larger  and  more  important 
yards  should  be  heard  from  first. 

Mr.  HURLEY.  I  have  no  objection. 

Mr.  H.  L.  DICKERSON  (of  the  Standard  Shipbuilding  Corporation). 
Our  final  contract  with  the  Fleet  Corporation  is  for  10  boats  on  a 


25 

lump-sum  price,  of  which  3  have  been  launched,  6  are  on  the  ways, 
and  the  final  keel  is  to  be  laid  this  month,  probably  the  26th.  The 
contract  was  signed  March  1,  1918,  prior  to  the  first  award  in  that 
district  of  the  Macy  Board.  The  contract  price  was  $179  a  ton,  which 
carried  the  usual  protection  on  the  labor  and  items  of  that  kind. 

Mr.  HURLEY.  That  contract  is  with  the  Fleet  Corporation? 

Mr.  DICKERSON.  Yes,  sir.  The  plant  expenditures  by  the  company 
are  about  $2,000,000.  The  Fleet  Corporation  has  expended  about 
$3,000,000,  without  any  provision  for  amortization,  and  an  adclitronul 
million  dollars  predicated  on  the  assumption  that  we  should  get 
additional  contracts,  which  we  did  not  get. 

Mr.  HURLEY.  Your  corporation  has  spent  an  additional  million 
dollars? 

Mr.  DICKERSON.  No;  the  Fleet  Corporation,  so  that  the  Fleet  Cor- 
poration have  spent  approximately  $4,000,000,  of  which  the  one  mil- 
lion is  salvaged,  and  three  million  not  covered  by  any  provision  for 
amortization  or  salvage. 

Mr.  HURLEY.  There  is  a  mortgage  on  the  plant? 

Mr.  DICKERSON.  Yes,  sir. 

Mr.  HURLEY.  You  have  $2,000,000  in  and  the  Fleet  Corporation 
have  four  million. 

Mr.  DICKERSON.  Yes,  sir. 

Mr.  HURLEY.  We  have  four  million  ? 

Mr.  DICKERSON.  Yes,  sir;  the  Fleet  Corporation  have  invested 
about  $4,000,000. 

Mr.  HURLEY.  For  extension? 

Mr.  DICKERSON.  Yes. 

Mr.  HURLEY.  How  many  additional  ways  are  there? 

Mr.  DICKERSON.  Two  additional  ways,  with  additional  boiler  and 
engine  and  machine  shop  capacity. 

Mr.  HURLEY.  Is  that  all  finished? 

Mr.  DICKERSOX.  About  99  per  cent  finished. 

Mr.  HURLEY.  How  many  requisitioned  ships  did  we  take  over? 

Mr.  DICKERSON.  Thirteen,  all  of  which  have  been  delivered. 

Mr.  HURLEY.  Who  had  these  contracts? 

Mr.  DICKERSON.  Originally? 

Mr.  HURLEY.  Yes. 

Mr.  DICKERSON.  I  can  not  give  you  the  names,  but  there  were 
some  for  Norwegian  and  Italian  owners,  two  for  French  owners,  and 
two  or  three  for  the  Cunard  Line. 

Mr.  HURLEY.  Have  you  any  knowledge  of  what  the  contracts  were 
taken  over  for? 

Mr.  DICKERSON.  The  original  contracts  signed  for? 

Mr.  HURLEY.  Yes. 

Mr.  DICKERSON.  Yes;  $147.50  to  $180  a  ton.  I  think  they  will 
average  about  $165. 

Mr.  HURLEY.  And  the  requisitioned  ships  have  all  been  delivered? 

Mr.  DICKERSON.  Yes,  sir. 

Mr.  HURLEY.  And  you  are  working  on  Fleet  Corporation  con- 
tracts? 

Mr.  DICKERSON..  Final  contracts  with  the  Emergency  Fleet  Cor- 
poration. 

Mr.  HURLEY.  And  how  many  more  keels  are  to  be  laid? 


26 

Mr.  DICKERSON.  One.  We  have  a  launching  on  the  26th.  Ninety, 
per  cent  of  the  material  was  ordered  before  the  armistice  was  signed 
and  practically  all  the  plate  shop  work  for  all  the  boats  is  completed. 

Mr.  HURLEY.  Have  you  any  idea  as  to  the  cost  of  these  ships; 
what  it  is  costing  the  Fleet  Corporation  ? 

Mr.  DICKERSON.  The  requisitioned  ships  cost  about  $202  a  ton; 
the  contract  ships,  these  final  10  I  estimate  will  cost  about  $212. 

Mr.  HURLEY.  I  thought  that  was  $221,  the  last  estimate. 

Mr.  DICKERSON.  No,  sir. 

Mr.  HURLEY.  $212? 

Mr.  DICKERSON.  Yes,  sir. 

Mr.  WILKINSON.  May  I  ask  a  question?  Is  that  cost  the  invest- 
ment of  the  Government? 

Mr.  DICKERSON.  It  is  the  cost  to  the  country — labor,  material,  and 
overhead. 

Mr.  WILKINSON.  That  is  the  selling  price? 

Mr.  DICKERSON.  That  is  the  contract  p>rice  with  protection. 

Mr.  JOHN  C.  PEW  (of  the  Sun  Shipbuilding  Co.).  I  should  like  to 
wait  until  some  of  the  others  have  spoken;  our  yards  are  small  and 
we  are  new  in  the  business. 

Mr.  C.  W.  MORSE  (Virginia  Shipbuilding  Co.  and  the  Groton  Iron 
Works).  This  is  quite  interesting  to  me,  because  of  the  conclusion  of 
the  wooden  contract  I  made  with  Gen.  Goethals.  He  asked  me  to 
build  some  5, 000- ton  steel  ships,  and  I  established  a  yard  for  that 
purpose.  I  objected;  I  said  these  ships  are  not  going  to  be  worth 
anything  when  the  war  is  over.  I  did  not  want  to  build  anything  less 
than  9,000  tons.  He  said  that  Mr.  Franklin  said  that  Europe  would 
build  the  big  ships  and  we  could  build  the  little  ones,  so  that  it  is 
interesting  to  me  to  see  that  the  board  wants  to  cancel  little  ships 
and  build  big  ones. 

As  a  result  of  the  conference  I  had,  we  contracted  for  12  ships  at 
Groton  and  12  at  Virginia.  Of  the  12  ships  at  Virginia,  one  was 
launched  about  two  months  ago.  If  we  ever  get  through  making 
alterations  for  the  Government,  we  will  deliver  her,  but  the  last  I 
heard — this  morning — was  to  take  off  the  upper  deck,  the  fly  deck. 
There  will  be  another  vessel  launched  there  on  Saturday  next.  There 
will  be  two  more  launched  before  the  4th  of  July.  The  contract  there 
was  for  12  ships,  at  $165  a  ton,  on  the  basis  of  wages  and  material. 
Now,  as  I  understand,  the  object  of  this  meeting  was  to  see  if  we 
could  not  reduce  the  price  in  some  way  to  help  the  Shipping  Board 
out  of  this  emergency;  we  would  be  glad  to,  if  we  could. 

We  would  be  glad  to  meet  the  Shipping  Board  in  any  way  that  it 
is  possible,  but  in  the  first  place,  the  labor  we  can  not  touch ;  we  are 

Prohibited  from  putting  that  down,  and  our  contract  is  based  on  that 
ibor  scale;  second,  our  contract  is  based  on  the  price  of  material — 
for  80  per  cent — and  anything  we  save  in  that  goes  to  the  Shipping 
Board.  There  is  a  long  list  that  is  called  "  Schedule  C."  What  can 
we  save  for  you  gentlemen  on  that?  I  do  not  see  how  we  can  save 
but  very  little  outside  of  what  you  save  yourselves  in  the  purchases. 
We  are  willing  and  want  to  assist  in  every  way  we  possibly  can,  but 
I  can  not  see  how,  except  you  save  in  the  purchases  or  allow  us  to,  and 
be  a  little  more  considerate  in  your  changes.  I  think  we  have  had  a 
hundred  changes  at  least  since  we  started.  We  are  getting  them 


27 

every  day,  and  it  is  very  expensive  and  adds  tremendously  to  the 
cost/  You  asked  us  to  be  frank 

Mr.  HURLEY.  Don't  hesitate  to  say  what  you  want. 

Mr.  MORSE.  It  seems  to  me  that  is  the  principal  thing  the  Govern- 
ment can  save  in  the  9,400-ton  ships— the  changes  that  are  daily 
being  asked  of  the  shipyards.  The  next  thing  is  the  purchase  of  ma- 
terial. If  we  could  have  the  cooperation  of  the  board,  we  could  save 
a  lot  of  money  that  way. 

Mr.  HURLEY.  In  what  way  ? 

Mr.  MORSE.  Furnish  the  cash  to  buy  the  stuff  with. 

Mr.  HURLEY.  How  much  money  have  you  invested  ? 

Mr.  MORSE.  The  yard  cost  $3,300,000;  the  Shipping  Board  put  up 
$750,000;  the  rest  we  put  up. 

Mr.  HURLEY.  That  is  the  Alexandria  yard  ? 

Mr.  MORSE.  Yes. 

Mr.  HURLEY.  What  about  Groton? 

Mr.  MORSE.  The  Groton  yard  cost  about  four  million ;  the  Govern- 
ment, according  to  the  progress  payments  to  date,  according  to  their 
way  of  figuring,  the  Government  owe  us  $2,600,000  and  on  the  wood 
yard  $1.600,000. 

Mr.  HURLEY.  What  is  your  original  investment  in  the  wood  yard  ? 

Mr.  MORSE.  We  owned  the  wood  yard  long  before  we  entered  into 
the  contract. 

Mr.  HURLEY.  Yes ;  but  what  is  the  original  investment  ? 

Mr.  MORSE.  I  think  $400,000. 

Mr.  HURLEY.  And  the  Government  has  an  additional  $1,600,000 
in  there  ? 

Mr.  MORSE.  No. 

Mr.  HURLEY.  How  much  did  they  spend? 

Mr.  MORSE.  I  can  not  tell  you;  they  started  in  to  make  progress 
payments;  then  they  changed  to  imprest  fund;  then  they  stopped 
that  and  paid  the  pay  roll  part  of  the  time  and  part  of  the  time  they 
did  not. 

Mr.  HURLEY.  How  much  have  we  put  in  the  housings  at  Groton  ? 

Mr.  MORSE.  I  think  about  $1,200,000. 

Mr.  HURLEY.  What  was  the  original  contract  for  housing? 

Mr.  MORSE.  Two  million;  we  stopped  you  from  putting  up  any 
more.  We  put  up  $350,000  ourselves,  the  Government  came  in  there 
and  we  made  a  contract  with  the  Government — I  do  not  know  whether 
it  has  been  framed  or  not — to  throw  in  our  $350,000,  and  they  would 
take  the  housings  and  take  all  the  risk. 

Mr.  HURLEY.  What  about  the  steel  ships  in  the  Groton  Iron  Works? 

Mr.  MORSE.  One  sailed  from  New  York. 

Mr.  HURLEY.  How  many  contracts  have  you? 

Mr.  MORSE.  Twelve. 

Mr.  HURLEY.  How  many  have  been  finished? 

Mr.  MORSE.  One  has  been  delivered ;  one  is  ready  to  be  delivered ; 
one  is  to  be  launched  on  the  30th  of  this  month ;  and  as  near  as  I  can 
estimate,  one  every  month. 

Mr.  HURLEY.  How  many  ways? 

Mr.  MORSE.  Six. 

Mr.  HURLEY.  Any  keels  laid? 

Mr.  MORSE.  Yes,  sir ;  there  are  7  keels  laid,  8  keels  laid  out  of  12. 


28 

Mr.  HURLEY.  Four  yet  to  be  laid? 

Mr.  MORSE.  Four  to  be  laid. 

Mr.  HURLEY.  Of  what  capacity  ? 

Mr.  MORSE.  Six  of  them  are  8,800  tons;  six  of  them  are  9,400;  all 
at  Virginia  are  9,400.  But,  regarding  a  saving  of  price,  I  do  not  see, 
as  far  as  our  contract  goes — we  have  no  cost-plus  contract — I  do  not 
see  but  what  it  is  up  to  you  more  than  to  us.  If  you  can  show  us  any 
way  we  can  do  it,  we  will  be  glad  to  cooperate,  but  you  see  you  pro- 
hibit us  on  labor,  you  say  out  of  savings  on  80  per  cent  of  material, 
that  it  goes  to  you,  and  I  do  not  see  where  we  can  contribute. 

Mr.  HURLEY.  Has  your  staff  and  workmen  increased  their  efficiency 
any  since  the  armistice  has  been  signed  ? 

Mr.  MORSE.  Oh,  yes,  sir.  Our  turnover  is  large  down  there  for  a 
new  yard.  You  must  bear  in  mind  that  both  our  yards  are  new  yards. 
The  ground  was  broken  in  Alexandria  on  the  1st  of  February  a  year 
ago,  and  we  have  had  to  build  the  works  at  the  same  time  that  we 
were  building  the  vessels.  We  have  down  there  10  vessels  fabricated ; 
have  the  steel  out.  We  will  be  through  the  15th  of  next  month  our 
fabricating  work  for  the  Government,  provided  they  do  not  give  us 
the  two  ships  they  suspended. 

Mr.  HURLEY.  What  do  you  think  these  ships  will  cost  per  dead- 
weight ton,  Mr.  Morse  ? 

Mr.  MORSE.  Well,  you  know  I  made  an  offer  for  three  boats  at  $215 
a  ton ;  $225  for  the  * Gwiston  Hall.  When  a  man  can  get  credit  to 
build  ships  I  do  not  hesitate  to  say  that  I  could  sell  every  ship  we  are 
building  at  the  cost  to  you.  I  think  they  will  cost  you  about  $1,800,000 
or  $1,900,000  apiece. 

Mr.  HURLEY.  $225  a  ton. 

Mr.  MORSE.  Not  that,  probably. 

Mr.  HURLEY.  Are  they  7,500-tonners  ? 

Mr.  MORSE.  No;  9,400.  Of  course,  I  do  not  know  the  policy  of  the 
Shipping  Board,  but  if  I  am  allowed  to  make  a  suggestion- 
Mr.  HURLEY.  Glad  to  have  it. 

Mr.  MORSE.  Sell  some  of  the  ships  you  now  have  on  favorable 
terms  and  JTOU  can  get  out  of  them  all  the  money  they  cost. 

Mr.  HURLEY.  Would  you  transfer  the  flag? 

Mr.  MORSE.  Not  necessarily.  This  proposition  was  not  a  transfer 
of  flag,  and,  so  far  as  the  wooden  ships  go,  Mr.  Hurley,  I  wrote  a  letter 
to  Mr.  Piez  on  the  1st  of  January,  according  to  which  he  could  have 
gotten  out  on  four  wooden  ships  we  built  at  their  cost,  and  45  days 
later  I  got  an  acknowledgment  of  the  letter  asking  if  the  matter  was 
still  under  advisement.  The  offer  on  the  Gunston  Hall  was  made,  I 
think,  at  $225,000— $100,000  down,  one-quarter  before  she  went  to 
sea,  and  the  balance  over  a  certain  time.  I  make  bold  to  say  that  I 
could  get  for  you,  if  you  make  the  terms  reasonable,  the  full  price  of 
these  ships  as  they  come  off. 

Mr.  HURLEY.  What  do  you  means  by  reasonable  terms,  install- 
ments ? 

Mr.  MORSE.  I  mean  one-quarter  down  and  one-quarter  4,  8,  12,  or 
16  months;  something  like  that.  You  see,  Mr.  Hurley,  they  can 
not  borrow  money  and  there  are  very  few  people  who  have  the  cash 
to  pay  for  a  $2,000,000  ship  that  they  will  pay  right  down  for  it.  If 
the  Shipping  Board  gets  all  that  he  earns,  it  seems  to  me  that  they  do 
not  take  much  risk,  unless  they  could  get  somebody  to  pay  cash  down. 


29 

Mr.  HURLEY.  You  would  want  a  little  more  than  you  could  charter 
the  ship  for. 

Mr.  MORSE.  You  want  some  earnest  money  from  them. 

Mr.  HURLEY.  That  is  the  thing  we  have  before  us. 
Mr.  MORSE.  You  could  figure  the  freight;  you  know  what  they  get, 
and  if  you  get  one-quarter  of  a  million  dollars,  and  all  she  earns,  and 
something  more,  it  seems  to  me  that  would  be  one  way  of  meeting 
that  financial  difficulty.  I  do  not  know  how  the  4,500-ton  ships  would 
sell ;  I  am  speaking  now  of  the  9,400-tonners. 

Mr.  HURLEY.  We  are  trying  to  find  what  the  cost  of  these  ships  is 
on  the  average,  not  as  an  individual  ship. 

Mr.  MORSE.  As  it  has  been  stated  here,  the  cost  has  not  gone  down 
any.  The  greater  part  is  labor;  the  labor  that  enters  into  the  con- 
struction of  everything  that  goes  into  the  ship,  as  well  as  the  con- 
struction of  the  ship  itself.  I  think  the  cost  of  material,  if  it  goes 
down,  you  get  the  benefit  of  it  under  your  contract. 

Mr.  HURLEY.  Do  you  think  that  we  could  compete  with  Great 
Britain  on  the  building  of  ships  ? 

Mr.  MORSE.  Under  certain  conditions;  yes,  sir.  If  you  will  make 
a  contract  and  let  the  American  bureau,  or  British  Lloyds  vise  the 
work  and  everything  that  is  done  in  the  ships,  and  allow  the  people 
money  enough  in  progress  payments  to  discount  the  bills,  so  that 
they  can  buy  in  the  cheapest  market,  they  can  compete  with  any  place 
in  the  world.  We  can  at  our  yard,  I  do  not  hesitate  to  say,  but  if 
you  are  going  to  have  eight  or  ten  inspectors,  who  keep  changing  the 
ship  every  day  they  come  along  you  can  not  get  at  the  lowest  cost. 
Our  ship  was  changed  from  turbine  engines  to  reciprocating,  and 
from  water  tube  boilers  to  Scotch  boilers.  It  should  have  been  Scotch 
boilers  at  first  in  my  opinion.  And  then,  regarding  all  the  little 
fixings.  As  I  say,  that  ship  is  lying  there  to-day,  and  it  should  have 
been  off  a  month  ago.  I  can  furnish  the  next  ship  for  you,  as  an  indi- 
vidual, a  month  sooner  than  I  could  furnish  it  for  the  Shipping 
Board,  and  at  a  good  deal  less  cost,  and  make  it  conform  to  all  the 
specifications  in  the  contract,  but  when  you  make  a  contract  and  then 
continually  change  nobody  can  tell  what  the  cost  is. 

Mr.  HURLEY.  You  mean  by  that,  if  you  revised  that  contract  and 
took  upon  yourself  the  entire  responsibility  of  finishing  the  ship,  you 
could  reduce  the  cost  of  it? 

Mr.  MORSE.  Let  the  British  Lloyds  of  the  American  bureau  have 
their  inspectors  there,  and  we  will  guarantee  the  ship  to  class. 

Mr.  HURLEY.  And  you  could  reduce  the  cost,  and  it  will  be  more 
satisfactory  to  the  Government  and  to  you  ? 

Mr.  MORSE.  Yes;  you  have  things  on  that  ship  that  are  utterly 
uncalled  for.  You  have  a  companionway  for  an  old  tar  to  go  down 
on  the  ship,  and  he  has  always  been  used  to  going  down  a  rope 
ladder.  Then  you  have  teakwpod  furnture  and  fixtures.  Nobody 
would  think,  011  a  merchant  ship,  of  putting  in  these  things.  You 
could  get  the  same  efficiency,  and  the  same  earnings  out  of  a  ship  that 
would  cost  you  a  lot  less  money,  get  the  same  classification,  and  that 
is  all  a  ship  sells  for.  You  could  not  sell  a  ship  because  the  Emer- 
gency Fleet  built  it  for  any  more  money  than  you  could  if  the 
American  bureau  or  British  Lloyds  passed  it.  That  is  what  you  fall 


30 

back  on.  The  men  who  are  put  in  the  technical  department  think 
they  must  do  these  things.  They  are  put  there  for  some  purpose,  and 
these  changes  come  in  from  day  to  day.  But,  if  you  want  to  save 
some  money  on  the  ships,  give  us  the  contract,  let  us  change  the  con- 
tract wherever  there  is  absolute  waste  and  give  you  the  benefit,  and 
have  the  ship  classified.  I  would  not  hesitate  to  say  that  any  ship- 
owner in  New  York  or  anywhere  could  sell  one  of  these  snips  at 
$100,000  less  and  satisfy  him  and  satisfy  the  Government.  I  make 
that  suggestion  to  you  and  I  think  it  is  perhaps  well  for  you  to  con- 
sider it.  Now,  you  say  that  there  is  over  three  billion  that  the  Gov- 
ernment has  appropriated. 

Mr.  HURLEY.  The  Government  has  not  appropriated  it.  It  has 
authorized  three  billion  and  some  millon  dollars  to  carry  out  this 
program. 

Mr.  MORSE.  Has  the  board  exhausted  that? 

Mr.  HURLEY.  Not  the  authorization. 

Mr.  MORSE.  Didn't  that  cover  all  the  commitments?  You  will 
have  to  excuse  me,  but  Mr.  Piez  repeatedly  told  me  they  had  plenty 
of  money.  It  seems  to  me  you  are  very  close-fisted  if  you  have. 

Mr.  HURLEY.  We  are  short  of  money.  Don't  you  understand 
that  Congress  authorized  us  to  make  contracts;  but  they  only  ap- 
propriated enough  of  the  money  authorized  to  go  from  July  1  to 
June  30  in  each  fiscal  year.  Now,  then,  we  are  getting  very  short 
of  money,  and  we  are  up  against  it  in  so  far  as  continuing. 

Mr.  MORSE.  They  have  not  appropriated  enough  money  to  carry 
out  what  they  authorized? 

Mr.  HURLEY.  Oh,  no;  they  never  do.  They  only  appropriate  for 
one  year.  That  applies  to  all  Government  agencies;  every  depart- 
ment here  must  have  money  appropriated,  not  authorized.  Authori- 
zation and  appropriation  are  different  things. 

Mr.  MORSE.  I  thought  you  said  they  had  authorized  that.  I 
thought  that  was  the  same  as  appropriated. 

Mr.  HURLEY.  They  have  authorized  it,  but  not  appropriated  the 
money,  and  have  not  placed  in  the  Treasury  for  our  account  the 
entire  amount  authorized.  Now,  we  must  go  before  Congress,  inas- 
much as  the  urgent  deficiency  bill  was  not  passed  at  the  last  Con- 
gress ;  otherwise,  we  would  have  had  all  the  money  required  to  carry 
out  our  contracts,  but  we  must  go  before  Congress,  explain  the  situ- 
ation and  they  will  ask  us  for  a  recommendation. 

Mr.  MORSE.  I  do  not  like  to  put  our  troubles  before  you  people, 
but  the  Emergency  Fleet,  when  the  Groton  Iron  Works  went  into  the 
receiver's  hands,  owed  them  $4,200,000.  That  is  the  statement  ren- 
dered by  the  receivers  to  you,  and  the  reason  we  had  to  put  it  in 
the  receiver's  hands — we  did  it  ourselves — was  because  we  had  checks, 
signed  by  our  company,  and  by  the  Emergency  Fleet  Corporation, 
which  the  bank  did  not  have  the  money  to  honor.  That  is  what  oc- 
casioned that  concern  going  into  receiver's  hands.  There  was  no 
more  need  of  that  concern  going  into  receivers'  hands  than  the  United' 
States  Government. 

Mr.  CARSE.  Mr.  Hurley,  one  thing  you  mentioned.  In  regard  to 
the  question  of  American  yards  competing  with  British  yards  in 
building  merchant  vessels,  I  think  it  should  be  very  clearly  under- 
stood, in  the  question  of  competition,  that  the  vessels  should  be  of 
the  same  nature  and  class.  These  vessels  being  built  in  the  United 


31 

States  now  are  very  much  more  expensive  than  vessels  for  similar 
work  being  built  in  Great  Britain,  because  they  have  very  many 
things  on  their  vessels  which  the  British  do  not  even  think  of,  and 
these  things  add  very  greatly  to  the  expense ;  but  I  believe,  I  see  no 
reason  why,  for  similar  ships,  the  shipyards  of  the  United  States 
should  not  fairly  compete  with  British  yards. 

Mr.  H.  A.  EVANS  (Baltimore  Dry  Dock  &  Shipbuilding  Co.). 
What  is  the  relative  rate  of  wages  in  Scotland  and  this  country 
among  shipbuilders? 

Mr.  CARSE.  I  do  not  know. 

Mr.  EVANS.  It  is  two  to  one.  We  pay  twice  as  high  wages.  Are 
shipbuilders  in  Scotland  better  trained,  or  as  well  trained  as  the 
shipbuilders  in  this  country  ? 

Mr.  MORSE.  Very  much  better. 

Mr.  EVANS.  Then,  how  can  we  talk  about  competing  in  cost  with 
Scotland  ? 

Mr.  MORSE.  I  said  in  course  of  time. 

•  Mr.  HURLEF.  Mr.  Evans,  I  would  like  to  answer  that.     Do  you 
know  anything  about  the  production  per  man  in  Scotland  yards  ? 

Mr.  EVANS.  Some  of  us  were  educated  over  there,  and  we  know 
that  practically  in  our  yards  the  majority  of  our  best  trained  men 
are  called  "  Mac  " — Scotchmen.  There  are  exceptions,  of  course. 
Ask  some  of  the  old  shipbuilders  who  have  been  in  the  business  all 
their  lives.  These  men  over  there  not  only  give  the  man  a  training; 
there  are  opportunities  for  education. 

Mr.  HURLEY.  I  would  like  to  talk  to  you  a  little  later  on  that 
question.  I  have  been  making  a  study  of  that. 

Mr.  MORSE.  In  1905  I  contracted  for  two  ships  with  the  Clyde  Co., 
the  Savannah  and  the  Mexico,  $1,050,000  a  piece.  I  could  have 
gotten  the  same  ship  on  the  Clyde  for  $650,000.  That  is  the  relative 
prices  at  that  time.  Now,  as  I  understand  it,  I  may  be  misinformed 
upon  it — the  prices  on  the  Clyde  have  gone  up  more  than  they  have 
here.  I  understand  there  is  a  labor  situation  there  that  is  worse — 
that  is  higher  in  percentage  than  here. 

Mr.  EVANS.  The  average  wage  is  about  43  to  45  cents  an  hour. 

Mr.  HURLEY.  We  have  all  these  figures,  Mr.  Evans,  and  also  the 
production  per  man,  if  you  would  like  to  go  over  that  with  me.  I 
do  not  think  you  are  right.  That  matter  will  come  up  later. 

Gentlemen,  we  are  very  much  obliged  to  you  for  coming  here.  It 
is  5  minutes  to  1  now,  and  if  you  will  return  at  2.30  this  afternoon, 
we  will  appreciate  it,  and  put  in  the  afternoon.  We  want  everyone 
to  have  something  to  say.  This  is  instructive  and  helpful  to  us,  and 
we  appreciate  the  spirit  in  which  you  have  come  here.  Do  not  hesi- 
tate to  ask  questions.  We  are  here  to  answer  them. 

(The  meeting  thereupon  recessed,  to  reconvene  at  2.30  p.  m.) 


AFTER  RECESS. 


The  board  reconvened  at  2.30  o'clock  p.  m.,  pursuant  to  recess. 

Mr.  HURLEY.  Gentlemen,  if  there  are  any  new  arrivals  I  would 
like  very  much  to  get  names.  I  mean  if  there  are  any  gentlemen  here 
now  that  were  not  here  this  morning,  we  would  like  to  have  their 
names. 


32 

Mr.  Dilke,  you  represent  the  Carolina  Shipbuilding  Co.  I  would 
like  to  hear  from  you. 

Mr.  F.  C.  DILKE  (president  of  the  Carolina  Shipbuilding  Co., 
Wilmington,  N.  C. ) .  We  have  an  agency  contract,  and  we  probably 
haven't  had  enough  experience  as  yet  to  contribute  very  much  to 
the  subject  of  this  meeting.  We  are  very  much  interested,  however, 
in  hearing  the  expressions  of  the  shipbuilders. 

Mr.  HURLEY.  I  wish  you  would  tell  how  much  money  you  have 
put  in  and  how  much  the  Government  has  put  into  your  yards,  so 
that  we  may  have  the  whole  story. 

Mr.  DILKE.  This  is  a  four-way  yard.  We  have  four  ways  com- 
pleted. The  plant  is  just  now  practically  completed  with  four  ways. 

Mr.  HURLEY.  And  the  keels  laid  ? 

Mr.  DILKE.  We  have  four  keels  laid,  and  are  hoping  to  launch  the 
first  ship  on  July  4.  We  will  have  the  second  one  ready  to  go  within 
30  clays  after  that. 

Mr.  HURLEY.  HOWT  many  ships  have  you  contracted  for? 

Mr.  DILKE.  Twelve  9,600-ton  Federal  ships.  We  have  our  steel 
practically  complete  for  the  first  four  ships,  and  we  have  the  steel 
practically  75  per  cent  complete  for  the  second  four.  We  are  having 
the  midship  section  fabricated  at  Roanoke,  Va.,  and  we  are  fabricat- 
ing the  rest  of  the  steel  at  Wilmington.  We  have  four  ways  and 
all  of  the  plant  facilities  for  installing  and  outfitting  complete. 
The  engines  and  boilers,  of  course,  come  from  the  outside. 

Your  investment  there  up  to  the  present  time  is  about  $2,200,000, 
but  that  includes  a  lot  of  extra  work  that  was  done  on  two  additional 
ways  that  were  not  completed,  and  were  canceled;  and  in  building 
the  yard  on  a  layout  providing  for  eight  ways.  We  started  with  a 
four-way  yard,  you  understand.  I  don't  know  whether  all  this  is  of 
interest  or  not  ? 

Mr.  HURLEY.  Yes,  indeed ;  go  ahead. 

Mr.  DILKE.  We  started  with  a  four-way  yard  planned  for  more 
ways,  and  after  Mr.  Schwab  came  in  he  and  Mr.  Piez  talked  to  us 
about  making  an  eight-way  yard.  We  rather  held  back  from  eight 
ways,  feeling  that  the  community  was  not  large  enough  to  support 
a  yard  as  large  as  that,  but  we  were  given  an  order  to  build  a  yard 
on  the  plan  of  making  eight  ways  possible,  and  then  at  a  later  time, 
being  given  an  order  to  build  two  additional  ways,  which  meant  of 
course  correspondingly  increasing  the  other  features  of  the  plant 
capacity,  and  all  of  those  other  features  were  added  for  the  six-way 
yard,  but  the  two  additional  ways  were  not  finally  completed.  They 
are  all  excavated,  but  were  stopped  on  the  15th  of  October. 

I  haven't  yet  been  able  to  get  an  estimate  that  I  feel  is  accurate 
enough  to  talk  about  as  to  the  probable  cost  of  the  ships  we  have  on 
the  ways.  It  will  probably  run  over  $200  a  ton,  but  I  don't  think 
very  much. 

Mr.  HURLEY.  How  much  money  have  you  spent  on  housing  ? 

Mr.  DILKE.  All  we  spent  on  housing  was  $48,000,  which  was  for  a 
hotel,  Fleet  Corporation  property,  the  hotel  which  we  are  operating. 
The  housing  proposition  never  went  through  and  that  $48,000  is  in- 
cluded in  the  figure  I  previously  mentioned  as  cost  of  the  plant.  We 
found  that  very  helpful  in  holding  the  men  there.  We  are  pretty 
much  isolated,  110  miles  off  the  main  line  of  the  Atlantic  Coast  Line, 


33 

and  while  our  experience  so  far  has  been  better  than  we  hoped  for 
with  men  coming  there,  it  has  been  difficult  at  times,  very  difficult  to 
take  care  of  them.  This  hotel  has  been  a  very  useful  feature. 

Mr.  HURLEY.  How  many  men  do  you  employ  ? 

Mr.  DILKE.  We  have  about  1,800  on  the  pay  roll  now,  and  they  are 
running  from  1,400  to  1,500  men  a  day  at  work.  About  50  per  cent 
of  them  are  Negroes,  and  the  last  figures  I  had  in  the  middle  of  last 
week  52  per  cent  of  our  riveters  were  Negroes.  They  are  doing  very 
good  work  and  we  have  succeeded  so  far  in  working  white  riveters 
and  Negro  riveters  on  the  same  ship. 

Mr.  HURLEY.  Have  you  increased  the  number  of  rivets  in  the  past 
month  or  two  over  what  you  formerly  did? 

Mr.  DILKE.  No  sir;  we'have  not,  we  have  been  running  an  average 
of  22  rivets  per  gang  hour  for  about  two  months. 

Mr.  HURLEY.  Working  piecework? 

Mr.  DILKE.  Altogether,  that  is  I  saj^  altogther,  there  are  always 
some  few  odds  and  ends  that  have  to  be  done  on  day  rate,  but  the  real 
driving  is  all  on  piecework  basis. 

Mr.  HURLEY.  How  far  advanced  is  the  material  on  the  last  four 
ships  that  you  have  a  contract  for? 

Mr.  DILKE.  About  30  per  cent  of  the  material  from  the  mills,  plain 
steel  has  been  delivered,  and  due  to  some  operations  which  we  could 
not  control  at  the  beginning  there  has  been  a  total  of  about  12  per 
cent  of  the  steel  fabricated  for  the  last  four  ships. 

Mr.  HURLEY.  Where  was  the  material  fabricated? 

Mr.  DILKE.  At  Roanoke,  Va. ;  the  Virginia  Bridge  &  Iron  Co.  We 
•have  not  fabricated  any  of  the  last  four  at  Wilmington.  We  are  just 
finishing  up  our  fabrication  for  the  first  four,  and  we  have  started 
on  the  finishing  of  the  shapes  for  the  second  four,  and  the  Virginia 
Bridge  is  now  shipping  steel  and  has  been  for  about  two  months 
on  the  second  four. 

Mr.  DONALD.  How  much  money  have  you  got  in  your  yard  alto- 
gether ?  How  much  have  you  invested  in  your  yard  ? 

Mr.  DILKE.  $2,200,000. 

Mr.  DONALD.  So  the  Fleet  Corporation  has  given  you  all  the  money 
in  your  yard  ? 

Mr.  DILKE.  We  are  working  with  an  invested  fund.  The  yard  is 
owned  by  the  Fleet  Corporation.  The  Fleet  Corporation  furnished 
all  the  money  except  for  60  days  at  the  beginning,  when  we  had  to 
use  about  $200,000  of  our  own  to  get  going  promptly. 

Mr.  W.  SCOTT  PROSKEY  (assistant  to  the  president  of  the  Atlantic 
Corporation,  Portsmouth,  N.  H.).  We  have  a  contract  to  build  ten 
8,800  ships,  of  which  we  have  two  practically  complete  and  five 
others  on  the  ways,  three  keels  not  having  been  laid.  Of  the  five  on 
the  ways  three  are  well  along  toward  construction. 

We  have  a  five-way  shipyard  with  a  very  complete  fabricating 
and  machine  plant.  We  make  our  own  engines  with  another  com- 
pany that  is  affiliated  with  us,  the  Mason  Machine  Co.  We  buy  our 
boilers. 

We  expect  before  the  end  of  the  year  to  have  completed  the  con- 
tract which  we  have  submitted.  There  was  much  delay  in  what  I 
might  call  cooperation  between  the  board  and  ourselves,  dating  from 
four  or  five  months  back.  For  instance,  the  first  ship  that  we  put 
121035—19 3 


34 

overboard  should  have  been  in  commission  some  time  ago,  as  we 
understand  she  Avas  chartered  some  time  ago,  and  it  was  due  pri- 
marily to  the  Shipping  Board  that  we  were  not  able  to  deliver  but 
two  ships.  However,  wre  hope  that  the  helpful  spirit  shown  by  Mr. 
Hurley  will  enable  us  to  adjust  our  differences  and  fix  the  matter 
so  that  whatever  ships  we  are  allowed  to  complete  shall  be  com- 
pleted in  harmony  and  with  satisfaction  to  the  Shipping  Board  and 
ourselves. 

Mr.  HURLEY.  What  is  your  figure?     What  do  you  think  the  ships 
will  cost  per  deadweight  ton  ? 
Mr.  PROSKEY.  Around  $200. 

Mr.  HURLEY.  And  how  much  money  has  the  Government  got  in 
your  yard  ? 

Mr.  PROSKEY.  I  understand  about  $3,000,000. 
Mr.  HURLEY.  How  much  has  the  Corporation  got  in? 
Mr.  PROSKEY.  The  Government  was  to  furnish  two- thirds  and  we 
were  to  furnish  one-third. 

Mr.  HURLEY.  How  much  have  you  put  in? 

Mr.  PROSKEY.  There  is  a  controversy  about  wThat  we  have  put  in 
now. 

Mr.  HURLEY.  There  isn't  any  doubt  as  to  what  you  have  put  in. 
You  know  what  you  have  put  in  ? 
Mr.  PROSKEY.  No,  sir;  I  do  not. 

Mr.  HURLEY.  You  were  to  put  in  one-third  and  we  were  to  put  in 
two-thirds,  and  we  have  put  in  $3,000,000.  You  haven't  put  in  your 
third? 

Mr.  PROSKEY.  There  is  a  controversy  over  that,  as  I  say.  The 
Shipping  Board  says  we  have  not.  I  am  not  prepared  to  say  whether 
they  are  right  or  not;  we  don't  think  they  are. 

Mr.  HURLEY.  What  about  the  material  for  the  ships  where  the 
keels  have  not  been  laid  ? 

Mr.  PROSKEY.  It  is  practically  all  there,  sir. 

Mr.  HURLEY.  Have  you  any  accurate  figures  on  the  cost,  or  just  an 
estimate  of  what  it  will  cost? 

Mr.  PROSKEY.  It  is  as  accurate  as  we  can  make  it  at  this  time.  We 
expect  within  a  week  to  have  more  accurate  figures. 

Mr.  HURLEY.  The  controversey  with  your  company  is  that  the 
Emergency  Fleet  officials  feel  you  have  not  put  in  your  portion  ? 
Mr.  PROSKEY.  Yes,  sir. 

Mr.  M.  P.  DOULLUT,  president  of  the  Doullut  &  Williams  Ship- 
building Co.  (Inc.),  New  Orleans,  La.  Our  yard  is  at  New  Orleans, 
Lake  Ponchartrain.  We  have  a  contract  for  eight  9,600-ton  ships, 
on  a  lump-sum  basis. 

Mr.  HURLEY.  How  much  a  ton  ? 

Mr.  DOULLUT.  Well,  the  figures  have  changed  so  much  owing  to  the 
labor  price,  etc.,  that  I  am  not  sure,  but  I  figure  it  is  in  the  neighbor- 
hood of  $182. 

Mr.  HURLEY.  What  was  the  original  contract  ? 
Mr.  DOULLUT.  About  $170.     I  am  not  positive,  but  it  was  about 
$170. 

Mr.  HURLEY.  How  many  ways  have  you  ? 

Mr.  DAULLUT.  We  have  four  ways.  We  have  four  ships  on  the 
ways  now.  We  have  received  the  steel  for  the  whole  eight  ships.  The 


35 

plant  is  ours;  we  put  in  half  a  million  dollars  of  our  own  and  the 
Shipping  Board  loaned  us  on  our  contracts  $600.000.  Our  plant  is 
complete  and  we  would  have  ohips  around  now  had  we  not  been 
delayed  by  the  Shipping  Board  owing  to  different  changes  in  decid- 
ing on  boilers,  etc. 

Mr.  HURLEY.  You  put  in  Scotch  boilers  or  water-tube  boilers? 
Mr.  DOULLUT.  Water-tube  boilers.     It  was  only  decided  about  a 
month  ago  that  we  were  going  to  use  water-tube  boilers. 

Xow  we  have  no  suggestions  to  make.  We  have  been  in  the  boat 
business,  tugs,  barges,  etc.,  for  40  years,  but  we  are  new  in  the  ship- 
building end. 

Mr.  HURLEY.  You  have  not  delivered  any  ships  as  yet? 
Mr.  DOULLUT.  Not  yet. 

Mr.  HURLEY.  When  were  you  to  launch  ships? 
Mr.  DOULLUT.  In  the  latter  part  of  August,  four  ships  to  be  com- 
pleted about  the  same  time.    The  fabricating  material  is  coming  for 
the  four  ships  together. 

Mr.  HURLEY.  What  is  your  thought  as  to  the  actual  cost  of  the 
ships  when  they  are  all  finished — roughly  ? 

Mr.  DOULLUT.  Well,  I  am  not  prepared  to  give  any  figures,  Mr. 
Hurley,  but  I  don't  feel  that  at  the  price  of  building  ships  there  is 
any  money  to  be  lost.    I  think  we  will  pull  out  all  right. 
Mr.  HURLEY.  Do  you  think  you  will  make  a  profit  ? 
Mr.  DOULLUT.  Yes,  provided,  of  course,  we  build  the  whole  eight 
ships,  because  we  have  got  a  good  deal  of  experience  on  our  first 
four  ships. 

Mr.  HURLEY.  You  buy  the  engines  and  boilers,  ,of  course,  outside  ? 

Mr.  DOULLUT.  No,  sir ;  we  buy  them  through  the  Shipping  Board. 

Mr.  DILKE.  I  want  to  correct  what  I  said  about  the  possible  cost  of 

our  ships.    Just  guessing,  I  think  we  have  reason  to  believe  that  after 

the  first  two  we  can  get  the  cost  a  little  below  $200.    I  think  we  will 

get  our  costs  well  below  $200  per  deadweight  ton. 

Mr.  JOHN  C.  PEW  (of  the  Sun  Shipbuilding  Co.,  Chester,  Pa.).  I 
am  a  little  new  in  the  game,  so  I  may  not  use  the  right  expression,  but 
I  will  go  ahead  and  tell  what  I  can. 

The  Sun  Shipbuilding  Co.  was  organized  and  w^as  about  complete 
when  the  United  States  went  into  the  war.  We  had  at  that  time  a 
complete  shipyard,  I  believe,  of  five  ways,  a  boiler  shop,  and  wre  made 
our  owTn  engines.  After  the  war  started  we  spent  about  $1,000,000 
additional  at  the  suggestion  of  Mr.  Schwab  and  other  officials  of  the 
Fleet  Corporation  in  building  a  second  wet  dock,  in  extending  our 
machine  shop  and  boiler  shop,  etc. 

We  have  about  $7,500,000  in  the  bare 'plant.  We  have,  as  you 
know,  only  contracts  for  four  cargo  boats.  The  rest  of  our  boats 
were  requisitioned  boats.  We  have  to-day  in  our  wet  docks  three 
cargo  boats  that  are  transferred — changed  to  transports.  We  have 
on  our  ways  four  tankers  and  one  cargo  boat.  We  have  three  cargo 
boats  yet  to  build  that  are  90  per  cent  fabricated  in  our  shops,  or 
better. 

We  feel  that  we  could  get  business  when  the  matter  is  settled  so 
that  the  general  public  who  are  inquiring  will  know  just  wrhat  the 
Government  is  going  to  charge  them  for  the  boats  if  they  sell  them. 
That  seems  to  be  the  question.  You  talk  to  a  customer  and  he  wrants 


36 

to  know  what  the  Government  is  going  to  do.  He  says :  "  If  I  can 
buy  a  boat  cheaper  from  the  Government  than  I  can  from  you.  of 
course  I  am  going  to  buy  it  from  the  Government."  And  that  seems 
to  be  one  of  the  questions  to-day,  and  that  is  what  we  are  rather 
interested  in. 

Mr.  HURLEY.  Have  we  any  money  in  your  yard? 

Mr.  PEW.  You  loaned  us  —  we  had  to  put  in  some  money — 
$2,000,000.  We  paid  part  of  that  off,  probably  $200,000.  I  don't 
know  the  exact  amount — I  mean  I  am  not  carrying  that  in  my  head. 

Mr.  HURLEY.  You  are  planning  to  pay  all  that  back? 

Mr.  PEW.  We  expect  to  pay  it  back. 

Mr.  HURLEY.  On  ships  you  are  now  building? 

Mr.  PEW.  I  don't  know  whether  we  will  quite  succeed  in  doing  that 
or  not,  but  we  expect  to  do  it  in  time.  They  have  a  mortgage  on  the 
plant  for  $2,000,000. 

Mr.  HURLEY.  What  do  you  figure  those  ships  will  cost,  Mr.  Pew? 

Mr.  PEW.  We  have  built  about  five  different  kinds  of  ships,  and  no 
two  of  them  are  alike.  They  have  probably  cost  anywhere  from  $175 
to  a  trifle  less  than  $250  a  ton. 

Mr.  DONALD.  You  mean  for  the  tankers  ? 

Mr.  PEW.  No;  I  mean  for  the  Luckenbach  boat,  which  is  now  <i 
transport,  our  most  expensive  boat,  twin  screw,  a  14^-knot  boat  and 
a  very  high  class  cargo  boat. 

Mr.  DONALD.  Of  course  she  would  be  more  expensive  than  the 
ordinary  cargo  ship. 

Mr.  PEW.  Considerably  more  expensive  than  the  cargo  boat;  yes. 
We  do  feel  that  we  are  improving  our  conditions;  that  our  costs  are 
going  down,  and  we  believe  they  will  go  down. 

Mr.  HURLEY.  What  is  your  thought  regarding  the  Government 
selling  ships  and  at  what  price  they  should  sell  them?  We  would 
like  to  get  your  personal  view  on  that. 

Mr.  PEW.  My  thought  is  that  the  Government  should  sell  these1, 
boats  at  a  cost  that  they  could  be  duplicated  for  to-day.  If  they  sell 
them  for  less  than  that  they  will  shut  down  the  shipyards.  In  our 
case,  unless  we  get  some  business  and  the  Government  makes  some 
decision,  we  will  have  our  fabricating  shops  shut  down  the  middle  of 
next  month,  for  we  will  be  through  with  the  Government  work  so  far 
as  that  is  concerned.  In  fact,  at  the  fabricating  shop  we  have  cut 
clown  our  force  now,  and  we  will  gradually  cut  down  the  force  all 
over  unless  the  public  buys  or  the  Government  buys. 

Mr.  HURLEY.  Supposing  the  Government  offers  ships  for  sale  to 
private  ship  operators  at  cost  and  they  did  not  purchase,  then  what 
steps  should  be  taken? 

Mr.  PEW.  At  cost,  you  say? 

Mr.  HURLEY.  I  say,  if  the  Government  offers  ships  for  sale  at  a 
price,  say,  about  what  they  cost  or  some  reasonable  price. 

Mr.  PEW.  I  would  think,  off  hand,  that  they  could  probably  even 
sell  them  at  less  than"  the  war  cost  somewhat  and  still  let  the  ship- 
builder do  business  with  the  general  public. 

Mr.  HURLEY.  Yes.  Well,  we  will  say  we  offer  then  at  a  lower 
figure  than  that  war  cost,  and  the  public  doesn't  buy:  what  position 
iire  we  in  then?  Then  what  should  we  do?  I  am  just  looking  for 
information,  vou  know. 


37 

Mr.  PEW.  I  don't  know,  Mr.  Hurley:  I  wish  1  did;  but  I  don't 
think  the  Government  should  offer  these  boats  at  such  a  figure  below 
the  present  cost  of  replacement  that  they  would  shut  down  all  the 
shipyards  in  the  country,  have  a  great  many  men  idle,  and  have  a 
great  many  people  who  have  been  running  these  shipyards  and  wrho 
haven't  obtained  anything  yet  in  the  way  of  a  return  on  their  money. 
I  don't  believe  any  of  them  have.  The  plant  may  be  worth  a  little 
more  and  may  be  worth  a  little  less  when  they  get  through  with 
them,  but  I  don't  believe  any  of  these  people  have  ever  made  any 
money  out  of  the  business,  and  to  keep  this  going — to  keep  the  men 
working — they  will  have  to  sell  them  at  about  the  present-clay  cost. 

Mr.  HURLEY.  What  is  the  present-day  cost  ?  That  is  what  we  are 
trying  to  find  out. 

Mr.  PEW.  I  don't  know  exactly,  because  no  two  boats  are  alike. 
You  ask  for  the  present-day  cost  on  an  IH-knot  boat,  and  it  would 
be  one  price;  on  a  14-knot  boat  it  would  be  another  price.  I  am  not 
sufficiently  versed  in  the  shipbuilding  business  to  answer  that  ques- 
tion. There  are 'men  here,  I  presume,  that  do  know.  But  I  know  in 
our  own  case  there  has  been  quite  a  difference  in  the  cost. 

Mr.  HURLEY.  Yes;  there  is  no  doubt  of  that.     We  recognize  that. 

Mr.  PEW.  What  we  are  anxious  to  do  is  to  have  some  decision  so 
we  can  keep  on  going.  Mr.  Haig  just  suggested  that  we  had  eight 
boats  canceled  a  little  while  ago.  Of  course,  I  don't  know  whether 
those  will  come  back  or  not.  If  the  Government  continues  in  the 
shipbuilding  business  we  would  like  to  have  those  reinstated. 

Mr.  HURLEY.  What  size  were  they? 

Mr.  PEW.  10,300  and  10,500-ton  boats.  They  were  tankers  the 
whole  lot — 84,000  tons,  Mr.  Haig  says;  the  same  size  as  our  cargo 
10,000  tons — the  total  amount  canceled  was  84,000  tons. 

Mr.  HURLEY.  We  are  very  much  obliged  to  you,  Mr.  Pew. 

Mr.  E.  B.  SADTLER  (engineer  for  the  Oscar  Daniels  Co.,  Tampay 
Fla.).  We  are  building  ten  9,500-ton  steel  ships,  designed  similar 
to  those  built  by  the  Texas  Co.  in  Bath,  Me.  We  have  seven  keels 
laid,  two  boats  overboard  waiting  for  machinery,  and  the  third 
ready  to  lauch,  waiting  for  propellers.  We  were  delayed  very  much 
at  the  start  getting  our  material,  and  after  three  months  of  work 
on  the  contract  we  had  our  engines  changed  and  the  people  we  were 
told  to  make  the  contact  with  by  the  Shipping  Board  promised  to 
send  the  engines  in  October  for  the  first  delivery,  and  the  first  one 
has  just  arrived  there  now — part  of  it.  It  is  not^all  at  the  yard  yet. 
The  second  one  we  hope  will  be  along  inside  of  a  month.  The  ship 
has  been  overboard  a  month  waiting  for  it.  The  first  ship  has  been 
overboard  nearly  three  months,  and  the  third  ship  is  ready  to  go 
overboard  as  soon  as  we  get  propellers  for  it.  It  has  been  held  up 
owing  to  a  change  in  the  propellers.  They  were  bronze  propellers 
and  it  took  some  little  time  to  get  them.  'The  blades  are  cast  and 
are  in  the  shop  now  being  worked,  and  we  hope  to  have  them  before 
very  long  so  that  the  third  ship  will  then  be  overboard.  The  fourth 
will  be  ready  to  launch  as  soon  as  we  get  the  third  out  of  the  way, 
and  the  fifth  is  close  behind  that.  The  sixth  and  seventh,  which  have 
only  had  their  keels  laid  since  the  first  and  second  went  overboard, 
are  not  so  far  advanced. 


38 

We  have  material  for  all  ships  in  the  yard,  and  a  large  portion  of 
it  fabricated — a  large  proportion  for  the  ship.  Beyond  that  there 
is  not  so  much.  We  have  had  to  slow  down  our  fabricating  shop 
and  only  have  about  half  of  the  working  force  because  we  can't 
take  care  of  the  material  outside. 

We  think  we  have  made  pretty  good  progress  considering  the 
amount  of  holding  back  we  have  had  from  various  sources,  and  the 
constant  changing — as  has  been  referred  to  before — in  our  plans,  con- 
stant additions,  mostly  small  items,  but  they  all  take  time ;  and  due 
to  the  fact  that  we  are  so  far  in  the  South  it  takes  some  little  time 
for  our  plans  to  be  approved,  and  wre  can't  make  very  rapid  headway 
on  that  account. 

Our  production  in  the  yard  is  getting  along  very  much  better.  We 
were  very  slow  at  the  start  because  we  were  in  New  York.  We  leased 
the  yard  from  the  Tampa  Shipbuilding  Co.,  and  they  had  two  3,500 
steel  ships  on  the  ways  which  had  been  commandeered  by  the  Ship- 
ping Board,  and  they  were  three  or  four  months  later  in  getting  them 
overboard  than  they  expected  when  we  took  the  yard — which  inter- 
fered with  us.  Their  ways  were  too  small  and  we  had  to  build  new 
ways,  and  we  built  four  ways,  and  then  were  urged  by  the  Shipping 
Board  to  build  a  fifth,  which  we  did.  Now  we  have  them  all  occu- 
pied and  work  going  along,  we  think  much  more  happily  than  it 
was  earlier.  Our  force  is  fairly  well  organized  now,  and  is  working 
harmoniously,  and  while  our  present  ships  are  costing  us  more  than 
we  think  they  ought  to,  we  feel  that  we  can  reduce  the  price  some- 
what in  the  future. 

Mr.  HURLEY.  How  much  are  these  ships  costing? 

Mr.  SADTLER.  We  don't  know  exactly,  because  of  the  fact  that  we 
haven't  yet  completed  one;  but  my  personal  opinion  is  that  it  will 
"  be  close  to  $200  a  ton  for  the  first.    I  think  we  will  get  below  that 
later  on. 

Mr.  HURLEY.  Have  you  spent  any  money  in  housing? 

Mr.  SADTLER.  None  whatever. 

Mr.  HURLEY.  HOAV  much  have  you  put  into  the  yards,  your  corpo- 
ration ? 

Mr.  SADTLER.  We  have  put  everything  into  the  yard,  practically. 
I  think  there  has  been  an  advance  of  $250,000  on  account  of  the  con- 
tract from  the  Shipping  Board,  but  the  yard  is  entirely  financed  by 
the  owners.  That  money,  I  understand,  is  to  be  paid  back  or  taken 
out  of  the  payments. 

Being  a  leased  yard,  of  course  we  only  have  the  equipment  there. 
We  had  to  double  up  a  number  of  tools,  increase  the  number  of  shops 
and  put  in  a  great  deal  which  was  not  in  the  yard,  in  order  to  meet 
the  requirements  of  the  Shipping  Board,  such  as  fire  prevention  and 
matters  of  that  sort.  We  put  in  five  new  ways  and  new  derricks  to 
serve  them,  and  all  new  docks  with  the  exception  of  one.  There  was 
one  clock  there  that  belonged  to  the  owners  of  the  yard. 

We  think,  considering  the  circumstances,  we  are  making  good 
progress,  but  when  I  speak  of  that  price  of  completion  of  the  ships, 
it  is  dependent  on  completing  our  contract,  under  which  the  keels 
for  three  more  ships  are  yet  to  be  laid.  The  next  ship,  however,  is 
ready  to  be  laid  and  will  'be  laid  as  soon  as  we  can  put  this  ship  over- 
board. 


39 

Mr.  HURLEY.  When  do  you  think  you  will  finish  your  entire 
contract  ? 

Mr.  SADTLER.  That  is  problematical.  If  we  are  going  to  be  de- 
layed as  much  as  we  have  been  on  our  engines,  it  is  a  very  difficult 
thing  to  say.  The  boilers  have  been  changed  also  for  several  of  the 
ships;  we  think  they  will  be  furnished  more  rapidly  now.  We  have 
them  in  three  ships  now,  and  the  fourth,  which  has  been  changed  to 
a  different  type,  is  to  be  shipped  to  us  very  shortly. 

I  am  afraid  there  will  be  delay  on  the  engines.  They  are  being 
furnished  by  a  Birmingham  firm  that  never  built  engines  of  that  size 
before,  and  they  were  turned  over  to  us  by  the  Shipping  Board,  and 
we  were  directed  to  make  a  contract  with  them.  Their  work  has 
been  very  slow  and  a  very  great  deal  of  it  which  came  down  had  to 
be  sent  back  for  corrections.  The  result  is  we  have  been  very  much 
delayed  in  that  respect. 

Mr.  HURLEY.  It  looks  more  encouraging  now? 
Mr.  SADTLER.  It  does  now ;  yes.  We  have  got  a  first-class  marine 
engineer  watching  everything  at  their  plant  now,  and  I  think  we  are 
going  to  get  better  results.  This  first  engine,  as  I  say,  is  mostly  in 
the  yard  now  being  installed,  and  if  we  get  them  one  a  month  here- 
after, that  will  regulate  about  how  soon  we  will  get  through  with  the 
contract.  I  don't  think  they  can  furnish  them  much  faster  than 
that.  They  say  they  can.  but,  judging  by  previous  experience,  I 
doubt  it. 

Mr.  HURLEY.    What  are  these,  reciprocating  engines? 
Mr.  SADTLER.  Reciprocating,  yes.     We  started  out  with  turbines, 
but  owing  to  delay  in  getting  the  turbines  the  Shipping  Board  .di- 
rected us  to  put  in  reciprocating.     They  are  water  tube  boilers. 

Mr.  WILKINSON.  Is  that  an  old  yard  or  an  entirely  new  yard? 
Mr.  SADTLER.  The  yard  was  built,  I  think — started  about  two 
years  previous  to  our  taking  an  order,  to  build  boats  for  running 
up  the  Hudson  river.  They  never  built  but  that  one  steel  boat. 
Previous  to  that  they  had  two  3,500-ton  steel  ships  contracted  for  by 
private  parties,  sold  to  the  Cunard  Line,  and  commandeered  by  the 
Shipping  Board.  That  was  the  Tampa  Shipbuilding  Co.  When 
Ave  took  the  yard  it  had  about  half  the  capacity,  about  half  the  num- 
ber of  tools  that  it  has  noAv.  We  built  five  new  ways.  We  are  not 
using  any  of  the  old  ways ;  they  are  too  small  and  too  slightly  built. 
In  fact,  only  one  there  was  up  to  300  feet  and  the  other  one  was  still 
smaller  and  very  slightly  built  and  couldn't  handle  a  ship  of  any 
size. 

Mr.  HURLEY.  How  much  money  have  you  in  the  yard  as  a  whole? 

Mr.  SADTLER.  I  am  not  prepared  to  say,  Mr.  Hurley.     I  am  only 

the  engineer  of  the  concern,  and  am  not  thoroughly  familiar  with 

the  financial  end  of  it.     I  think,  however,  in  the  neighborhood  of 

$700,000. 

Mr.  HURLEY.  Mr.  Hunter,  have  you  anything  to  say? 
Mr.  H.  C.  HUNTER  (secretary  of  the  Standard  Shipbuilding  Co., 
Shooters  Island,  N.  Y.).  We  have  a  contract  for  ten  9.000-ton,  what 
we  term  ''merchant  type,"  ships  similar  to  those  being  constructed 
by  the  Merchant  Corporation,  Bristol  and  Newburg. 

Our  yard  has  five  ways,  with  full  capacity  for  fabrication,  ma- 
chine-shop work  and  outfitting.     These  ships  were  fabricated  by  the 


40 

American  Bridge  Co. — straight  bodies ;  practically  85  per  cent  of  the 
fabrication  is  done  by  the  American  Bridge  Co.,  and  the  balance 
done  in  our  yard.  We  have  the  material  for  all  ten  ships  in  the 
yard  except  for  certain  outfitting  equipment.  The  fabrication  be- 
ing done  by  us  is  practically  completed.  We  expect  to  finish  that 
entirely  by  the  1st  of  July. 

We  have  one  ship  ready  for  delivery,  one  will  be  launched  this 
week,  and  two  others  as  fast  as  we  can  get  the  ways  from  under 
them. 

The  reason  for  the  development  in  that  particular  way,  four  ships 
coming  along  so  nearly  together,  was  due  to  the  fact  that  the  fabrica- 
tion by  the  American  Bridge  Co.  was  in  units  of  four,  so  that  the 
material  was  all  delivered  practically  at  the  same  time — that  is,  four 
in  each  division — and  our  work  naturally  went  forward  as  that  ma- 
terial was  received.  We  have  tried  to  work  away  from  that  as  much 
as  we  could  in  order  to  bring  the  development  along  more  in  line 
with  the  possibilities  of  individual  deA7elopment,  but  it  has  been  diffi- 
cult to  separate  the  work.  We  expect  now  to  have  the  last  keel  laid 
August  1,  and  to  complete  the  delivery  of  these  10  ships  by  the  end 
of  the  year. 

We  had  an  additional  contract  for  six  ships  of  the  same  type  which 
has  been  suspended.  The  material  for  these  six  ships  was  in  the 
process  of  fabrication  by  the  American  Bridge  Co.  at  the  time  of  the 
suspension. 

The  cost  per  deadweight  ton  probably  will  run  approximately 
$200,  as  nearly  as  we  can  now  figure  it. 

Mr.  HURLEY.  How  much  money  have  you  in  the  yard? 

Mr.  HUNTER.  The  yard  is  a  new  yard  constructed  entirely  for  the 
emergency.  We  have  side  launching  with  five  ways  and  an  outfitting 
berth  that  will  take  care  of  four  ships  at  one  time. 

Mr.  HURLEY.  How  much  money  have  you  invested  in  the  yard  ? 

Mr.  HUNTER.  The  plant  was  entirely  financed  by  the  Emergency 
Fleet  Corporation  under  a  lump-sum  contract.  There  was  an  ad- 
vance made  of  10  per  cent  at  the  time  of  the  contract,  and  progress 
payments  made  from  that  time  on.  We  have  ourselves  advanced 
certain  moneys  necessary  to  carry  on  our  operations.  The  Emergency 
Fleet  Corporation  has  a  mortgage  on  the  plant  which  is  to  be  reduced 
as  the  ships  are  delivered,  in  proportion. 

Mr.  HURLEY.  The  Government  owns  the  entire  yard? 

Mr.  HUNTER.  The  Government  has  a  mortgage  on  the  plant.  That 
mortgage  is  to  be  reduced  as  the  ships  under  contract  are  to  be  de- 
livered. 

Mr.  HURLEY.  But  it  was  financed  by  the  Government? 

Mr.  HUNTER.  Yes. 

Mr.  HURLEY.  Thank  you  very  much. 

Mr.  W.  T.  SMITH  (of  the  Chester  Shipbuilding  Co.,  Chester,  Pa.). 
We  have  already  gone  through  the  process  of  adjustment,  Mr. 
Hurley,  as  the  result  of  a  proposal  made  by  us  in  December. 

We  had  at  the  time  the  Emergency  Fleet  Corporation  was  cre- 
ated 30  contracts,  under  which  we  have  delivered  10  boats.  The  ad- 
justment made  in  December  set  a  price  of  $150  a  ton,  in  which  there 
was  a  calculated  profit  of  $10  a  ton.  The  boats  are  running  about 
that  in  cost— about  $160. 


41 

Mr.  HURLEY.  $160? 

Mr.  W.  T.  SMITH.  Yes.  the  adjustment  was  made  as  a  result — the 
contract  prices  on  which  we  were  requisitioned  varied  from  about 
$80  a  ton  up,  and  the  adjustments  were  made  by  precise  calculations 
as  to  the  exact  difference  in  cost  between  the  estimates  and  what  the 
cost  was  running  as  result  of  the  various  Macy  Board  rulings.  So 
we  figure  we  have  already  gone  through  that  process  of  adjustment, 
having  anticipated  your  request  now. 

Mr.  HURLEY.  Do  I  understand  you  to  say  that  of  the  ships  you  are 
now  building — you  delivered  10;  you  have  got  20  more  to  deliver, 
all  of  which  were  requisitioned  ships,  and  you  are  building  the  last 
20  on  the  $170  a  ton  basis? 

Mr.  W.  T.  SMITH.  All  of  them. 

Mr.  HURLEY.  The  entire  30? 

Mr.  W.  T.  SMITH.  Yes. 

Mr.  HURLEY.  At  the  flat  price  ?    Have  we  any  money  in  the  yard  ? 

Mr.  W.  T.  SMITH.  No;  certain  demands  had  been  made  prior  to 
that  time  by  the  Emergency  Fleet  Corporation,  but  it  was  invested 
in  inventory,  and  that  inventory  is  held  in  your  name  and  not  in 
ours  until  it  is  applied  to  the  boats  and  credited  against  the  contract 
price. 

Mr.  HURLEY.  What  class  of  ships  are  you  building? 

Mr.  W.  T.  SMITH.  9,000  tons. 

Mr.  HURLEY.  All  of  the  same  size  ? 

Mr.  W.  T.  SMITH.  No;  we  had  both  tankers  and  cargo  ships.  We 
have  now  laid  down  four  of  the  standard  boats  similar  to  what  we  are 
building  at  Bristol,  with  differences  in  equipment  which  came  as  a 
result  of  different  purchases.  Otherwise  the  boats  are  similar  in 
type  and  installation.  There  has  been  invested  in  the  yard  about 
$5,500,000. 

Mr.  HURLEY.  That  is  your  own  money  you  have  put  in? 

Mr.  W.  T.  SMITH.  Our  own  money ;  yes. 

Mr.  J.  M.  WILLIS  (of  the  Baltimore  Dry  Dock  &  Shipbuilding  Co., 
Baltimore,  Md.).  May  I  ask  Mr.  Smith  if  that  $160  and  $170  he  is 
speaking  of  doesn't  refer  to  his  requisitioned  price? 

Mr.  W.  T.  SMITH.  They  are  all  requisitioned. 

Mr.  WILLIS.  Ships  where  the  price  was  obtained  for  material  and 
auxiliaries  before  the  war? 

Mr.  W.  T.  SMITH.  Yes ;  practically  all  the  material  was  purchased 
before  the  entrance  of  the  United  States  into  the  war. 

Mr.  HURLEY.  You  purchased  material  at  very  much  lower  prices? 

Mr.  W.  T.  SMITH.  Very  much  lower  prices ;  yes,  sir. 

Mr.  H.  B.  WILKINSON,  of  the  Toledo  Shipbuilding  Co.,  Toledo, 
Ohio.  And  the  difference  is  about  $45  per  ton. 

Mr.  W.  T.  SMITH.  About  $20  a  ton. 

Mr.  WILKINSON.  And  on  auxiliaries  about  $15  more,  about  $30  or 
$35  more. 

Mi-.  W.  T.  SMITH.  Xo:  I  am  speaking  about  the  material  when  I 
say  the  difference  is  about  $20  a  ton.  That  includes  engines,  boilers, 
and  plates. 

Mr.  WILKINSON.  The  difference  on  four  of  our  requisitioned  ships 
will  run  about  $30  to  $32  a  ton  on  what  we  paid  as  to  what  we  are 
paying  to-day. 


42 

Mr.  HURLEY.  He  said  $20  a  ton  included  engines,  boilers,  and 
plates. 

Mr.  W.  T.  SMITH.  I  think  also  that  the  volume  of  our  business 
may  have  had  something  to  do  with  that,  because  some  of  this  was 
purchased  for  15  boats.  Naturally  we  got  all  the  advantage  on  that 
volume  of  purchase.  And  they  were  not  bought  on  time. 

Mr.  J.  M.  WILLIS.  Were  not  a  lot  of  these  ships  complete,  where 
you  are  giving  this  average  cost,  before  the  advance  in  wages  ? 

Mr.  W.  T.  SMITH.  Only  two  of  them. 

Mr.  WILLIS.  But  on  a  number  of  them  you  had  done  a  great  deal 
of  work  ? 

Mr.  W.  T.  SMITH.  Yes;  we  laid  the  keels  of  some  of  them  in  the 
early  part  of  1917. 

Mr.  HURLEY.  But  most  of  your  increased  cost  of  labor  is  going 
into  these  ships  now  to  help  make  this  high  price. 

Mr.  W.  T.  SMITH.  Well  the  scale  has  been  going  steadily  up,  and 
as  we  have  laid  down  the  different  boats  the  same  rate  of  wage  has 
not  applied  to  any  two  of  them. 

Mr.  HURLEY.  Well,  you  have  got  a  third  of  them  finished.  When 
did  you  deliver  the  10,  the  last  five? 

Mr.  W.  T.  SMITH.  Two  in  1917  and  eigh't  last  year — seven  last 
year  and  one  this  year  so  far. 

Mr.  HURLEY.  Well,  up  to  the  last  part  of  last  year  you  probably 
had  lower  wages? 

Mr.  W.  T.  SMITH.  Up  to  the  1st  of  October.  The  decision  of  the 
Macy  Board  in  October  increased  the  cost  of  the  labor  obviously  by 
the  difference  in  the  rate  and  reduction  in  the  hours.  It  is  also  true 
that  during  1917  and  1918  we  worked  9J  hours  instead  of  8. 

Mr.  HURLEY.  But  the  20  that  you  are  now  finishing  up,  on  the 
jncreasecl  wages — how  much  of  the  material  of  the.  last  20  you  are 
building  had  been  purchased  in  1917  ? 

Mr.  W.  T.  SMITH.  Probably  half  of  it  at  least. 

Mr.  HURLEY.  And  the  other  half  you  got  the  regular  prices  on? 

Mr.  W.  T.  SMITH.  Yes,  it  may  be  interesting  in  view  of  Mr. 
Corse's  statement  that  they  were  the  first  conceivers  of  the  fabricated 
ship  to  say  that  before  he  went  into  the  business  the  Chester  Ship- 
building Co.  had  bought  the  material  from  the  Newark  Erecting  Co. 
We  don't  claim  to  be  the  originators  of  the  idea;  we  give  credit  to 
the  New  York  Shipbuilding  Corporation. 

Mr.  PESSANO.  May  I  ask  if  the  material  you  bought  was  not  all 
fabricated  and  delivered  to  you  fabricated? 

Mr.  W.  T.  SMITH.  Why,  the  ships  that  were  done  in  advance  of  the 
present  time,  similar  to  what  we  are  doing  at  Frisco,  the  American 
Bridge  Co.,  furnished  about  65  per  cent  in  weight.  We  figure  about 
40  per  cent  in  labor  is  ours,  of  fabrication.  Now  later  boats  which 
wre  are  doing  at  Frisco  come  from  the  Manitowac  and  also  Merrill  & 
Stevens.  They  run  about  82  per  cent  in  weight,  about  55  per  cent 
in  labor  hours  and  fabrication.  The  material. conies  to  the  yard 
with  about  125,000  rivets  driven. 

Mr.  PESSANO.  May  I  ask  if  you  can  tell  us  how  much  per  ton 
you  paid  for  the  original  fabricated  material  delivered? 

Mr.  W.  T.  SMITH.  I  think  it  was  in  the  neighborhood  of  $28. 

Mr.  PESSATSTO.  That  is  the  answer. 


43 


Mr.  HURLET.  What  part  of  the  30  ships  did  you  pay  $28  a  ton  for? 

Mr.  W.  T.  SMITH.  The  first  10. 

Mr.  HURLEY.  But  on  the  last  20  you  are  paying  the  regular  market 
price  for  them  ? 

Mr.  W.  T.  SMITH.  Yes. 

Mr.  HURLEY.  So  that  on  the  ships  you  are  building  now,  under 
present  labor  and  material  conditions,  vou  are  building  for  $170  a 
ton? 

Mr.  W.  T.  SMITH.  Yes. 

Mr.  WILKINSON.  How  many  has  he  delivered— 

Mr.  HURLEY  (interposing).  Just  a  moment,  please.  You  are  build- 
ing the  last  20  with  labor  and  material  at  the  present  market  prices, 
and  you  are  figuring  on  making  $10  a  ton  at  that  price? 

Mr.  W.  T.  SMITH.  Yes ;  the  contract  restricts  us  to  that  profit. 

Mr.  HURLEY.  Well,  what  do  you  do  when  you  make  more  than  that  ? 

Mr.  W.  T.  SMITH.  Return  it  to  you. 

Mr.  HURLEY.  Go  ahead,  Mr.  Wilkinson. 

Mr.  WILKINSON.  I  would  just  like  to  get  some  comparisons  as  we 
go  along.  We  want  to  be  fair. 

Now  just  to  give  you  a  thought,  we  built  12  ships  last  year,  and  we 
gave  the  Government  $1,200.000.  We  got  $180  a  ton  for  our  ships, 
4,000-ton  ships,  which  are  nearly  all  equipped  with  engines  and  boil- 
ers and  all  the  modern  improvements.  We  paid  the  highest  price  for 
all  that  material  that  has  ever  been  known,  and  the  highest  price  for 
labor.  That  is  $180  for  a  4,000-ton  ship.  We  have  here  $190  that  we 
can  see  in  sight,  and  the  Lord  only  knows  how  much  more,  and  I  want 
us  to  get  down  somewhere  on  a  basis  and  see  how  we  compare. 

Mr.  HURLEY.  Now,  Mr.  Wilkinson,  you  gave  $1,200,000  to  the  Gov- 
ernent  ?  You  mean  in  taxes  ? 

Mr.  WILKINSON.  Yes. 

Mr.  HURLEY.  Well,  you  went  to  the  Avrong  department.  This  is 
where  we  want  that  money.  [Laughter.] 

Mr.  WILKINSON.  I  was  waiting  for  the  wind-up,  and  then  I  was 
going  to  make  a  suggestion  along  that  line,  but  I  might  just  as  well 
complete  it  now. 

When  you  get  down  to  comparison  of  prices  on  a  plant  that  has 
no  profit  and  has  returned  the  Government  nothing,  but  which  the 
Government  has  put  millions  of  dollars  into,  as  against  the  plant 
that  has  received  practically  nothing  from  the  Government  and  has 
turned  the  Government  $1*200,000  on  12  ships— that  is  $100,000  a 
ship,  which  brings  your  vessels  dow^n  to  $180  a  ton.  Now  when  you 
come  to  amortise  from  that  your  measley  little  four  or  six  hundred 
thousand  dollars  to  put  in  additional  improvements,  down  goes  $15 
more  a  ton,  and  we  are  giving  you  the  ships  at  about  $165  a  ton,  so 
far  as  the  Government  is  concerned. 

Now  I  agree  with  you  that  it  is  too  bad  that  the  money  can't  be 
turned  in  here,  and  probably  can,  and  if  you  can  fix  up  any  way 
whereby  we  can  pay  that  money  to  the  Shipping  Board  instead  of 
to  the  Government,  I  am  perfectly  satisfied  except  in  this,  that  I  do 
think  that  unless  the  Government  gets  the  money  from  some  source, 
we  probably  won't  build  any  ships. 

Mr.  ROSSETER.  $100,000  a  ship  on  a  4,000-ton  ship,  that  is  $25  a 
ton,  more  or  less. 


44 

Mr.  WILKINSON.  Yes. 

Mr.  ROSSETER.  Do  you  recall  about  what  the  rate  of  your  tax — 
what  your  tax  ratio  was  ?  Was  it  50  per  cent  or  60  per  cent  or  what  ? 

Mr.  WILKINSON.  Our  tax  ratio  was  about — as  I  remember,  we  had 
about  $350,000  left. 

Mr.  ROSSETER.  I  mean  you  tax  ratio.  Were  you  paying  50  per  cent 
or  GO  per  cent? 

Mr.  WILKINSON.  We  were  paying  nearer  80  per  cent — about  70 
per  cent.  Of  course  the  amount  of  cash,  real  cash  that  we  had  left 
when  we  got  through  was  smaller,  because  we  amortized. 

Mr.  ROSSETER.  But  this  is  the  point  I  wanted  to  get  clear  in  my 
mind :  If  you  paid  the  Government  $25  on  a  TO  per  cent  basis,  that 
left  more  or  left  $15  as  the  manufacturer's  profit, 

Mr.  WILKINSON.  Yes. 

Mr.  ROSSETER.  So,  therefore,  the  excess  cost  which  you  were  pay- 
ing to  taxes  and  the  normal  return  that  the  manufacturer  would  get 
was  $40  per  ton  ? 

Mr.  WILKINSON.  Yes. 

Mr.  ROSSETER.  I  just  wanted  to  be  clear  on  that. 

Mr.  WILKINSON.  Out  of  that  we  paid  our  shipbuilding  improve- 
ments, because  there  was  added  to  our  contract,  as  Mr.  Pessano  has 
told  you,  the  difference  between — the  amount  which  made  up  the 
profits:  or,  in  other  words,  the  agreement  with  us  was  that  we 
should  put  so  much  per  ton  into  improvements,  so  that  on  the  basis — 
I  am  giving  the  whole  profits,  the  gross  profits,  not  the  profit  after 
we  amortized  or  took  out  the  amount,  so  we  did  not  have  $15  left 
so  far  as  the  company  was  concerned,  but  we  did  so  far  as  percent- 
age was  concerned. 

Mr.  ROSSETER.  I  would  like  to  make  clear  that  my  question  was 
not  at  all  critical.  I  was  just  endeavoring  to  be  helpful  more  than 
anything  else. 

Mr.  WILKINSON.  I  understand.  I  am  only  sorry  that  we  could 
not  have  kept  the  difference  between  $1,200,000  and  what  we  put 
into  the  new  improvements.  Then  we  would  have  had  a  fair  per- 
centage for  the  stockholders,  but  had  we  not  put  it  into  improve- 
ments the  Government  would  have  taken  it  anyhow,  so  there  will 
be  no  regret,  because  we  couldn't  help  it. 

Mr.  ROSSETER.  Such  figures  are  very  interesting  to  me  when  we 
come  back  to  the  question  of  relative  costs  in  America  and  Great 
Britain  on  this  point  of  amortization  and  taxation  and  plant  allow- 
ance and  items  like  that,  That  will  come  very  prominently  into  com- 
parison of  British  costs  and  American  costs. 

Mr.  HURLEY.  It  is  very  important.  Mr.  Smith,  on  your  $10  a  ton 
profit  you  have  to  pay  out  of  that  your  percentage  to  the  Govern- 
ment? 

Mr.  W.  T.  SMITH.  Yes ;  that  is  the  earnings  of  the  company  with- 
out regard  to  the  tax  law.  We  will  pay  a  percentage  on  that. 

Mr.  HURLEY.  And  you  have  figured  on  that  ?  The  point  I  am  try- 
ing to  get  is  this:  On  the  line  Mr.  Wilkinson  has  been  developing 
we  are  trying  to  get  the  facts  about  the  situation  as  a  whole;  what 
the  Government  is  doing  to  you  men  and  what  they  are  doing  to  the 
industry  when  they  are  forcing  shipbuilding  to  pay  this  heavy  toll. 
That  is  what  we  are  trying  to  get  at. 


45 

Mr.  W.  T.  SMITH.  I  don't  confuse  the  question  of  cost  in  our  rela- 
tion to  the  Government. 

Mr.  WILKIXSOX.  Did  you  have  any  taxes  to  pay  the  Government 
on  $170,  if  you  please  ? 

Mr.  W.  T.  SMITH.  That  remains  to  be  seen. 

Mr.  WILKIXSOX.  That  is  what  I  was  contending,  Mr.  Hurley.  If 
they  built  three  ships  on  an  investment  of  $15,000,000  for  the  Gov- 
ernment I  don't  see  how  they  are  going  to  have  very  much  taxes  to 
pay  the  Government,  especially  if  they  lose  a  couple  of  million. 

Mr.  W.  T.  SMITH.  We  are  not  going  to  cross  that  bridge  until  we 
come  to  it. 

I  am  also  here  representing  the  Merchant  Shipbuilding  Corpora- 
tion, Bristol,  Pa. 

Mr.  HURLEY.  We  will  be  very  glad  to  hear  from  you  about  the 
Merchants. 

Mr.  W.  T.  SMITH.  There,  of  course,  we  are  in  the  capacity  of 
agents,  and  figure  rather  that  the  fee  we  get  is  for  services  rather 
than  for  profit.  We  contracted  to  design  and  build  the  plant  and 
organize  a  working  force  and  build  the  vessels  for  which  we  con- 
tracted. We  have  done  the  two  first  and  are  now  doing  the  second. 
We  have  laid  down  22  keels  and  have  launched  10  and  delivered  7. 

Mr  HURLEY.  I  think  it  would  be  a  good  idea  if  you  would  outline 
what  the  yard  cost  and  how  much  you  have  got  in  and  how  much 
the  Government  has  got  in.  I  would  like  to  have  all  those  things 
brought  out. 

Mr.  W.  T.  SMITH.  The  plant  cost  about  $14,200,000. 

Mr.  HURLEY.  How  many  ways? 

Mr.  W.  T.  SMITH.  Twelve.  We  also  have  a  service  shop  and  do 
considerable  manufacturing  of  machine  parts  ourselves — fittings,  etc. 

The  plant  was  originally  owned  by  us  and  we  had  started  in  on  our 
program  when  this  question  came  up.  We  then  turned  the  property 
into  the  Government  and  received  a  rental  for  it  and  went  on  and 
constructed  a  plant  on  that  property. 

The  cost  has  varied  from  about  $212  a  ton  down  to  $182  a  ton,  mak- 
ing an  average  of  about  $175.  It  is  consistently  going  down. 

Mr.  HURLEY.  Do  you  allow  a  fixed  charge  on  your  investment? 

Mr.  W.  T.  SMITH.    No;  no  charge  for  depreciation  or  amortization. 

Mr.  HURLEY.  Well,  if  you  don't  allow  any  of  that,  of  course  your 
prices  ought  to  be  low.  What  about  your  housing? 

Mr.  W.  T.  SMITH.  It  is  your  property,  you  see. 

Mr.  HURLEY.  I  understand. 

Mr.  HEXRY  R.  CARSE.  I  think  that  was  explained,  that  the  agents 
in  charge  have  accounts  furnished  by  the  Fleet  Corporation. 

Mr.  HURLEY.  I  am  not  questioning  that.  I  know  about  that,  but 
I  want  these  other  gentlement  to  know  the  facts,  too. 

Mr.  W.  T.  SMITH.  We  have  on  hand  at  the  present  time,  manu- 
factured and  raw  material  to  the  value  of  about  $20,000,000,  all  of 
which  has  been  converted  and  handled  and  is  in  the  average  cost 
which  I  gave  you.  So  the  average  to-day  doesn't  truly  express  the 
cost  of  the  vessels  completed  to-day. 

Mr.  HURLEY.  What  investment  have  you  in  housing? 

Mr.  W.  T.  SMITH.  A  little  over  $6,000.000. 

Mr.  HURLEY.  Is  that  in  the  original  figures? 


46 

Mr.  W.  T.  SMITH.  Xo;  that  is  separate  from  the  plant  and  is 
handled  by  your  Housing  Division. 

Mr.  HURLEY.  You  have  got  over  $20,000,000  invested  in  the  plant 
as  a  whole? 

Mr.  W.  T.  SMITH.  And  the  town,  yes. 

Mr.  HURLEY.  Are  there  any  questions  you  would  like  to  ask  him, 
gentlemen  ? 

Mr.  WILKINSON.  You  are  building  30  vessels? 

Mr.  W.  T.  SMITH.  Forty.  We  have  a  contract  for  60,  20  of  which 
have  been  canceled  so  far. 

Mr.  H.  A.  EVANS.  I  think  that  some  people  here  are  not  quite  clear 
about  that  $160  cost  yet,  and  I  would  like  to  put  it  to  Mr.  Smith  this 
way.  Were  not  these  ships  contracted  before  you  were  interested  in 
the  Chester  Shipbuilding  Co.? 

Mr.  W.  T.  SMITH.  Yes. 

Mr.  H.  A.  EVANS.  Were  they  not  contracted  at  prices  of  about  $80 
to  $90  per  ton? 

Mr.  W.  T.  SMITH.  Yes. 

Mr.  H.  A.  EVANS.  Which  would  have  bankrupted  the  concern  if 
they  had  to  carry  those  contracts  out?  They  would  not  have  bank- 
rupted your  concern,  but  I  mean  there  would  have  been  a  very  large 
loss,  and  the  Government  came  in  and  adjusted  the  contracts. 

Mr.  W.  T.  SMITH.  The  boats  were  taken  at  a  very  low  cost  per  ton. 
The  material  also  for  the  boats  was  at  a  very  low  cost  per  ton. 

Mr.  HURLEY.  On  10  ? 

Mr.  W.  T.  SMITH.  Yes,  and  there  is  some  doubt  in  pur  minds,  due 
to  the  lack  of  data  as  to  just  what  they  estimated  their  labor  to  cost 
as  against  what  our  actual  experience  is.  But  the  point  is  that  we 
took  all  of  the  contracts  that  we  had  on  hand  at  the  time;  we  took 
.everything  which  was  possible.  The  estimates  which  we  use  for  the 
future  was  our  existing  experience.  In  other  words,  we  simply  pro- 
jected, figuring  that  it  would  not  get  any  worse,  and  it  is  not  get- 
ting any  worse.  Of  course  we  are  getting  the  advantage  of  our  fore- 
sight, and  I  expect  Mr.  Hurley  would  like  to  hear  something  favor- 
able at  the  meeting  as  well  as  unfavorable. 

Mr.  HURLEY.  Yes.  We  have  requisitioned  a  great  many  ships  from 
many  yards,  and  in  doing  so  we  changed  the  contracts  to  meet  new 
conditions  as  they  developed  on  account  of  the  war,  and  this  is  a 
favorable  adjustment,  taking  into  consideration  the  present  price 
that  we  are  paying  for  many  of  these  ships.  That  is  the  only  thought. 
Are  there  any  other  questions  you  would  like  to  ask,  Mr.  Evans  ? 

Mr.  EVANS.  Those  contracts  were  taken  wrell  below  the  market  ? 

Mr.  HURLEY.  That  doesn't  enter  into  this  question  here  at  all.  If 
he  got  them  at  $10  a  ton  in  1917S  and  on  the  20  that  he  is  now  build- 
ing he  bought  material  at  the  present  market  price,  and  the  labor 
cost  him  the  same  and  he  is  building  them  for  $170  to  us,  why  it 
doesn't  matter  what  happened  in  1916  or  1917.  He  i.«  the  fellow 
that  has  confidence  in  his  ability  to  finish  them  under  present  condi- 
tions. A  paper  contract  doesn't  amount  to  anything;  it  is  the  ma- 
terial and  labor  going  into  it. 

Mr.  W.  T.  SMITH.  Another  factor  which  I  think  Mr.  Evans  is  over- 
looking ;  I  made  the  statement  that  we  had  received  certain  advances 
from  the  Emergency  Fleet  Corporation  for  which  they  had  a  certain 


47 

value  in  money.  All  of  the  parts  of  these  vessels  are  manufactured 
in  series,  which  is  obviously  the  cheaper  way  to  manufacture  than  to 
manufacture  for  one  boat  at  a  time.  That  is  our  claim  as  to  the 
superiority  of  the  standard  ship  from  the  price  standpoint,  and  we 
believe  it  is  true. 

Mr.  HURLEY.  That  is  a  manufacturing  proposition. 

Mr.  TV.  T.  SMITH.  Yes.  Xow  there  has  been  some  statement  made 
about  changes  made  in  the  contract  about  which  I  would  like  to  ask 
you.  There  are  a  good  many  changes,  Mr.  Hurley,  by  the  corpora- 
tion and,  as  you  know,  the  same  interests  have  an  operating  organiza- 
tion. We  are  sometimes  at  a  loss  to  understand  just  what  these 
changes  express  in  policy.  We  can  see  wrhere  some  changes  are  de- 
sirable, where  a  corresponding  increase  in  operating  cost  after  the 
boat  is  delivered  is  going  to  enter  into  it,  but  at  the  present  time 
changes  seem  to  be  a  little  bit  sporadic  and  not  quite  under  control. 
We  think  that  might  be  modified  a  good  deal,  because  in  the  stand- 
ard ship  any  change  you  make  you  never  can  recover  in  cost. 

Something  was  also  said  about  costs  going  up.  We  have  found 
costs  going  up  since  the  1st  of  October,  due  to  the  fact  that  we  have 
got  12  ways  at  Frisco,  which  absorbs  a  certain  amount  of  overhead. 
Obviously  you  can  finish  boats  quicker  by  a  proper  and  discreet  use 
of  overtime  or  any  other  means  that  appeals  to  you,  and  the  overhead 
absorbed  by  that  boat  would  be  considerably  less  than  under  the 
present  arrangement.  There  is  a  distinct  going  down  in  getting 
them  under  precise  control,  which  is  a  difficult  thing  to  do. 

Mr.  HILL  (of  the  Cast  Steel  Ship  Corporation).  We  are  just  nego- 
tiating to  build  two  ships,  and  the  price  probably  will  be  of  interest 
to  the  shipbuilders  in  this  country.  We  are  contracting  to  build  the 
hulls  of  two  11 -knot  cargo  ships,  10,000  tons,  for  $70  per  deadweight 
ton  for  the  hulls  alone  for  the  first  one  and  $65  for  the  second  one; 
and  we  calculate  a  very  wide  margin  of  profit. 

We  want  to  help  the  American  shipbuilders  as  far  as  they  would 
like  to  have  us  do  so.  and  from  that  point  of  view  I  thought  I 
would  make  a  very  brief  statement. 

Mr.  HURLEY.  Where  is  your  plant  ? 

Mr.  HILL.  We  have  no  plant  at  the  present  time.  We  are  just 
negotiating  to  put  up  a  plant  for  certain  private  interests  to  build 
these  ships,  and  then  turn  it  over  to  the  private  interests  and  retire 
from  the  actual  shipbuilding  ourselves.  We  are  naval  architects. 

Mr.  HURLEY.  Don't  you  think  we  have  got  enough  plants  here  now 
without  building  any  more? 

Mr.  HILL.  Well,  the  plants  are  all  right,  but  your  costs  are  way  up, 
and  there  is  where  we  hope  to  help.  If  American  shipbuilders  want 
to  get  down  to  a  point  where  they  can  compete  with  the  foreign 
builders,  why  we  can  help  by  our  process  of  shipbuilding. 

Mr.  HURLEY.  That  is  the  cast  steel? 

Mr.  HILL.  The  cast  steel,  yes. 

Mr.  W.  DOWNEY  (of  the  Downey  Shipbuilding  Corporation, 
Arlington,  Staten  Island,  N.  Y.),  We  have  a  contract  and  are  build- 
ing ten  7,800-ton,  lOJ-knot  boats,  our  own  design,  and  we  are  85  per 
cent  completed.  Six  of  them  are  launched  and  seven  wrill  be  launched 
this  week,  and  if  there  are  not  too  many  changes  introduced  we  will 
deliver  the  last  ship  in  September. 


48 

Mr.  HURLEY.  Deliver  it  or  launch  it? 

Mr.  DOWNEY.  Deliver  it.  Including  all  of  the  excess  costs — that  is 
the  excess  wage  costs  and  all  of  the  alterations,  changes,  etc. — and  we 
have  a  tremendous  amount  of  that — based  upon  what  we  known  of, 
about  85  per  cent  of  the;  physical,  actual  cost,  and  estimating  the  bal- 
ance, we  think  the  ships  will  cost  the  Fleet  Corporation  about  $192— 
possibly  $193 — per  ton  dead- weight. 

Mr.  HURLEY.  You  have  four  ways? 

Mr.  DOWNEY.  Four  ways,  yes. 

Mr.  HURLEY.  How  much  money  have  you  invested  in  the  property  ? 

Mr.  DOWNEY.  My  associates  and  I  furnished  $900,000,  and  we  have 
borrowed  $750,000  from  the  Fleet  Corporation  on  a  five-year  mort- 
gage. 

Mr.  HURLEY.  Is  that  all  the  Emergency  Fleet  Corporation  has  in  it  ? 

Mr.  DOWNEY.  That  is  all  the  Emergency  Fleet  Corporation  financ- 
ing that  has  been  done  for  us  outside  of  our  regular  shipbuilding  con- 
tract. We  made  the  contract  and  took  a  regular  first  payment  on  a 
shipbuilding  contract,  and  instead  of  furnishing  a,  surety  bond,  a 
contractor's  surety  bond,  we  paid  for  our  property  in  toto,  free  and 
clear,  and  then  we  gave  the  Fleet  Corporation  our  own  bond,  a  con- 
tractor's bond,  secured  by  mortgage  on  our  property,  and  that  bond 
is  being  liquidated  pro  rata  as  the  ships  are  delivered. 

Mr.  HURLEY.  You  are  referring  to  the  $750,000  ? 

Mr.  DOWNEY.  No;  the  first  ship  payments.  We  gave  a  bond  for 
that,  a  performance  bond  secured  by  mortgage  on  our  property. 

Mr.  HURLEY.  A  first  or  second  mortgage? 

Mr.  DOWNEY.  A  first  mortgage.  That  was  secured  by  a  first  mort- 
gage. That  is  a  security  mortgage.  Then,  in  May  of  last  year, 
when  Mr.  Schwab  came  with  the  Corporation,  he  was  very  much 
interested  in  the  quality  of  ships  that  we  were  building,  etc.,  and  he 
assured  me  that  the  Fleet  Corporation  would  want  us  to  do  a  large 
amount  more  of  shipbuilding,  and  he  asked  me  what  we  could  do  to 
help,  and  I  told  him  that  if  we  had  to  do  more  than  the  10  ships  we 
had  already  spent  about  $1,400,000  in  the  plant  in  additions,  and  I 
told  him  we  needed  about  $750,000  to  round  it  out  and  balance  the 
plant  for  a  ship  a  month.  So  he  loaned  us  $275.000  on  a  straight  5 
per  cent  mortgage  on  the  property. 

Mr.  HURLEY.  Is  that  all  the  money  the  Emergency  Fleet  has  in 
your  plant? 

Mr.  DOWNEY.  That  is  absolutely  all.  We  have  worked  along  with 
our  own  money  and  contract  money;  we  have  spent  probably  all  of 
our  possible  profit  in  that  contract  in  our  shipyard  additions,  and 
we  have  progressed  to  a  point  now  with  a  good  plant,  and  we  intend 
to  refinance  and  refund  and  pay  back  the  Fleet  Corporation  in  toto. 

Mr.  HURLEY.  When  do  you  figure  you  will  finish,  in  September  ? 

Mr.  DOWNEY.  We  will  deliver  our  last  boats  in  September.  Mr. 
Hurley,  without  a  doubt,  barring  some  abnormal  conditions. 

Mr.  HURLEY.  How  many  ships  have  you  delivered? 

Mr.  DOWNEY.  Three,  and  the  fourth  will  go  within  the  next  week, 
and  the  fifth  will  go  about  the  same  time,  and  the  last  in  September. 

It  may  be  of  interest,  Mr.  Hurley — I  am  deeply  interested  in  the 
success  of  the  United  States  in  shipbuilding,  regardless  of  my  own 
interest,  and  I  am  in  hearty  sympathy  with  your  attempts,  the 


49 

attempts  of  the  Shipping  Board,  to  'try  to  ascertain  what  the  real 
cost  of  ships  is  and  what  we  are  going  to  be  able  to  do  in  the  future. 
Now,  predicated  upon  our  experience  with  this  shipbuilding  con- 
tract, I  may  say — and  it  is  beyond  question — that  the  starting — take 
a  group  of  10  ships,  the  first  one  of  our  10  ships  has  cost  unquestion- 
ably 25  per  cent  more  than  the  last  one  of  our  10  ships,  and  I  am 
confident  that  if  I  had  10  more  duplicates  of  that  ship,  I  could  go  on 
and  reduce  those  costs  very  materially.  And  on  the  subject  of  the 
efficiency  of  men  now,  as  against  what  it  was  when  we  started,  and 
against  what  it  was  in  January,  building  up  a  new  shipbuilding 
organization — that  is,  the  personnel — is  fearfully  expensive  at  the 
start.  But  this  is  interesting:  We  received  our  first  steel  in  Novem- 
ber, 1917.  It  was  very  late.  Now  by  January,  1919,  I  received  a 
record  from  the  Fleet  Corporation,  Production  Department,  inform- 
ing me  that  our  yard  had  been  the  most  efficient  on  the  Atlantic 
coast  in  the  matter  of  production  per  man.  That  was  in  January 
of  this  year.  In  March  we  had  practically  finished  all  of  our  fabri- 
cation of  the  10  ships,  and  our  fabricating  department  was  going  dry. 
The  men  had  been  looking  forward  to  additional  shipbuilding  con- 
tracts; and  not  having  them  they  saw  the  plant,  the  work,  dying 
down.  Now  the  efficiency  of  those  men  in  January  was  way  up  and 
splendid,  but  since  that,  owing  to  the  fact  that  they  saw  the  job 
petering  out,  the  efficiency  has  been  going  down  again  very  much. 
Now  the  other  day  I  contracted  for  11  ships  from  private  owners, 
American  owners,  and  just  the  fact  that  that  contract  is  closed  has 
started  the  men  up  again  with  a  very  visible  improvement.  So  that 
these  costs  we  talk  about  are  regulated  largely  by  the  amount  of 
duplication  we  can  do  and  the  continuous  employment  of  the  men. 
If  the  men  see  ahead  for  months  that  their  job  is  secure,  you  will  have 
a  more  efficient  organization.  Seventy-eight  per  cent  of  our  men 
were  greenhorn  men  in  shipyards;  had  not  been  in  a  shipyard  two 
yoars  ago,  and  are  doing  splendid  work,  and  in  January  they  got  up 
to  an  efficiency  superior  to  anything  I  have  seen  in  a  shipyard  in  old 
days  with  regular  shipyard  mechanics. 

Now  on  the  matter  of  competition  between  American  and  the 
United  Kingdom  on  ship  costs,  I  don't  know  what  the  shipyard  costs 
are  in  the  United  Kingdom,  but  I  had  a  visit  from  an  English  banker 
and  shipowner  about  two  weeks  ago,  and  he  spent  half  a  day  in  the 
yard  and  was  greatly  interested.  He  owned  nine  ships  prior  to  the 
war.  He  lost  five  of  them  in  the  war  and  said  they  wanted  to  con- 
tract to  build  back  the  fleet  again,  but  he  told  me — and  I  think  he 
was  perfectly  frank  and  truthful  about  it — he  said  he  couldn't  get 
any  definite  price  from  a  responsible  English  shipbuilder.  He  said 
that  the  only  thing  he  could  do  was  to  get  cost-plus  contracts,  sub- 
ject to  so  many  possibilities  that  he  didn't  dare  to  close  a  contract  to 
fill  up  his  fleet  and  was  just  letting  it  drift  along.  Now  so  far  as  I 
have  been  able  to  make  a  study  of  what  little  information  we  can 
get  in  the  world  generally  regarding  ship  cost,  the  present  and  pos- 
sibilities of  the  future,  I  don't  believe  that  a  good  ship,  a  good  nor- 
mal ship,  is  going  to  sell  for  very  much  less  in  the  next  three  years 
than  what  it  is  costing  noAv.  That  is  my  belief.  Of  course  there  is 
a  difference  in  cost  of  ships  and  quality  of  ships.  The  type  of  'ship 
alters  the  tonnage  price  $15  or  $20  a  ton  easily,  and  the  quality  of 
121035—19 4 


50 

ships — for  instance,  the  Submarine  Boat  Corporation  with  merchant 
steel  and  a  straight  ship  and  a  great  number  of  duplicates  should  be 
able  to  build  that  ship  for  very  much  less  than  the  normally  designed 
ship  built  to  the  full  requirements  of  British  Lloyds  or  American 
Bureau  of  Shipping.  And  it  is  a  most  interesting  study,  and  I  con- 
gratulate the  Shipping  Board  on  this  attempt  to  get  together  the 
shipbuilders  and  develop  the  truth.  I  would  like  to  see  the  truth 
on  the  table  all  the  time. 

The  shipbuilders  are  entitled  to  a  fair  profit,  and  I  think  that  is 
all  they  could  ask,  but  I  do  believe  that  if  they  keep  on  in  harmony 
and  common  sense  that  there  is  a  very  good  possibility  that  we  may 
be  able  to  compete  with  the  United  Kingdom.  I  think  that  their 
condition,  Mr.  Evans,  has  gone  up  very  much  more  than  we  think. 
This  English  shipowner  and  banker  told  me  some  things  rather 
from  the  inside  that  do  not  at  all  appear  on  the  surface,  and  when 
he  saw  one  man  punching  a  big  ship  plate  in  our  plant  he  said  as 
he  looked  at  him :  "  We  can't  do  anything  like  that ;  we  would  have  a 
gang  at  that."  Instead  of  one  man  punching  a  ship  plate  in  Eng- 
land you  would  probably  see  three  or  four  or  five  men  around  that 
plate.  Now,  where  the  individual  is  getting  less  money,  therefore 
there  are  so  many  more  individuals  that  I  believe  in  the  ultimate  analy- 
sis we  are  punching  that  plate  cheaper  than  they  are.  So  all  of  those 
things  are  valuable,  and  I  would  be  glad,  Mr.  Hurley,  at  any  time  to 
do  anything  I  can  to  help  in  this  program. 

Mr.  HURLEY.  Mr.  Downey,  on  your  figures  there  you  say  you  only 
have  $750,000  of  the  Government's  money  invested  in  your  yard. 
These  figures  show  you  have  had  advanced  or  loaned  $3,255,000. 

Mr.  DOWNEY.  Mr.  Hurley,  we  closed  a  shipbuilding  contract  with 
the  Fleet  Corporation  at  $155  per  ton,  and  wTe  received  a  first  ship- 
building payment,  just  the  same  as  the  Norwegians  would  have  paid 
us — only  5  per  cent  less.  The  Norwegians  prior  to  that  had  been 
paying  25  per  cent  upon  a  single  contract ;  the  Fleet  Corporation  paid 
us  20  per  cent  upon  a  single  contract,  and  wre  gave  them  a  bond — a 
performance  bond — and  gave  them  a  mortgage  on  our  property  to 
secure  that  performance  bond.  That  has  always  been  mistaken  as 
money  that  the  Fleet  Corporation  loaned  us.  That  is  not  a  loan. 

Mr.  HURLEY.  An  advance. 

Mr.  DOWNEY.  It  was  the  first  payment  on  a  shipbuilding  contract, 
for  which  we  had  to  make  good  or  lose  our  property  under  the  bond. 

Mr.  HURLEY.  Well,  you  brought  that  up  and  I  just  wanted  to  ask 
you  that  question. 

Mr.  DOWNEY.  I  am  glad  to  have  it  understood,  because  it  has  been 
gossiped  around  that  the  Fleet  Corporation  has  loaned  us  that  enor- 
mous amount  of  money.  The  Fleet  Corporation  simply  made  us  that 
first  shipbuilding  payment,  the  same  as  I  would  have  gotten  from 
the  Cunard  people  if  I  had  closed  a  contract  with  them,  as  I  was 
prepared  to  do.  The  only  money  we  have  received  from  the  Fleet 
Corporation  is  $750,000,  and  that  is  secured  by  a  mortagage  on  a  New 
York  City  property  that  was  appraised  the  other  day  by  the  Ameri- 
can Appraisal  Co.'  at  $6,080,000.  And  the  Fleet  Corporation  will 
receive  all  that  if  we  don't  pay. 

Mr.  HURLEY.  Well,  I  don't  want  to  go  into  that  part  of  it. 


51 

Mr.  CARSE.  I  might  say,  the  vessels  that  are  being  built  by  the 
Submarine  Boat  Corporation  are  rated  by  Lloyd's  and  the  American 
bureau  at  the  highest  rating  given  to  any  ships. 

Mr.  DOWNEY.  That  is  very  interesting  to  know,  and  satisfactory  to 
me.  Now,  then,  if  we  could  get  Lloyd's  and  the  American  bureau  to 
give  any  shipbuilder,  or  the  Fleet  Corporation  or  the  Shipping 
Board,  the  highest  class  on  a  ship  built  of  Merchant's  steel,  we  could 
build  ships  cheaper  than  we  are  building  them  now.  No  doubt  about 
it.  So  anything  that  can  be  done  toward  substituting  Merchant's 
steel  and  a  straight  designed  ship  instead  of  the  orthodox  designed 
ships — if  that  can  be  accomplished,  that  will  reduce  the  cost  very 
much. 

Mr.  H.  G.  SMITH  (manager  Bethlehem  Shipbuilding  Corporation 
(Ltd.) ,  Wilmington,  Del.) .  I  haven't  a  great  deal  to  say,  Mr.  Hurley. 
It  seems  to  me  that  most  of  the  points  I  had  in  mind  have  been  pretty 
well  covered. 

We  are  operating,  as  you  know,  five  yards,  and  our  work  is,  or  a 
considerable  percentage  of  it,  Navy,  and  some  of  the  yards — three  of 
the  yards — exclusively  Emergency  Fleet,  and  the  other  two  more 
than  50  per  cent  Navy. 

The  statistics  of  contracts  on  hand  and  the  exact  status  of  each 
contract  are  filed  with  the  Shipping  Board  each  month.  My  recol- 
lection is  we  have  about  twenty-odd  contracts  not  yet  completed  for 
the  Shipping  Board,  work  on  which  is  progressing  very  rapidly, 
material  being  on  hand  for  practically  all  of  them. 

The  one  thing  that  has  come  up  in  the  discussion  here  to-day  that 
impresses  itself  upon  me  very  firmly  is  the  argument  in  connection 
with  possible  reductions  in  cost,  t  don't  want  to  deceive  myself, 
and  I  wouldn't  want  to  deceive  the  board  into  any  possible  error  as 
to  my  opinion  on  reduction  in  costs.  It  is  my  very  firm  belief  that 
there  is  no  possibility  of  expecting  quick  and  large  reductions,  dating 
from  the  time  of  the  signing  of  the  armistice.  The  reasons,  the  ele- 
ments affecting  costs  have  been  pretty  clearly  outlined.  They  start 
first  with  labor  and  material.  As  we  all  know,  the  labor,  if  anything, 
is  a  little  higher  on  account  of  adjustments  than  it  was  a  few  months 
ago.  The  material  has  fallen  very  little.  Now  labor  and  material 
are  elements  that  are  beyond  our  control,  and  as  I  see  it,  considerably 
beyond  the  control  of  the  board.  The  item  that  affects  the  ship- 
builder, and  in  which  he  can  effect  a  saving,  is  of  course  greater 
efficiency,  but  that  affects  labor  only,  and  there  is  only  a  certain 
degree  to  which  he  can  sow,  and  that  can  be  brought  about  only  with 
time.  It  can  not  be  brought  about  suddenly,  as  you  must  gradually 
develop  on  a  different  basis  from  the  bases  you  were  on  in  war  times. 

There  are  three  other  very  important  elements  that  have  been 
mentioned  here  affecting  costs,  elements  that  are  absolutely  under 
the  control  of  the  Shipping  Board,  and  those  are  the  elements  of 
changes,  inspection,  and  the  rumors  of  cancellations. 

This  question  of  changes  is  one  that  I  have  dealt  with  for  many 
years  in  Navy  contracts,  and  there  is  no  question  in  my  mind  but 
that  if  you  insist  on  changes  you  are  going  to  increase  enormously  the 
cost  of  your  vessels,  for  two  reasons:  First,  on  account  of  the  in- 
creased cost  due  to  the  change  itself ;  and  secondly,  on  account  of  the 


52 

disorganization  that  results  in  your  force.  And  one  way  to  affect  a 
great  saving  is  to  say :  "Here  is  your  ship ;  go  ahead  and  build  it  ex- 
actly in  accordance  with  the  plans." 

The  other  element  of  inspection  is  one  that  very  seriously  increases 
costs  if  we  are  not  careful.  That  has  been  very  thoroughly  dis- 
cussed by  Mr.  Downey  and  others,  but  it  is  a  serious  matter  in  connec- 
tion with  costs.  Assume  that  during  the  war  period  your  ships  were 
good  and  that  they  are  giving  entire  satisfaction  in  operation,  and  as- 
suming that  in  gradually  increased  efficiency  the  shipbuilder  him- 
self is  turning  out  even  a  better  ship  in  peace  times  than  he  did  in 
war  times,  you  are  gradually  obtaining  through  the  shipbuilder 
that  particularly  increased  efficiency,  and  if  you  add  to  it  close  and 
minute  inspection  upon  the  part  of  the  Shipping  Board  itself,  you 
add  a  large  element  to  the  cost,  because  you  are  going  to  slow  down 
production,  and  you  are  going  to  increase  the  cost  in  consequence 
thereof. 

The  third  matter,  one  of  cancellations,  is  one  that  has  been  pretty 
thoroughly  discussed,  and  it  is  a  very  disturbing  thing,  this  uncer- 
tainty in  various  yards  as  to  whether  they  can  complete  their  con- 
tract, whether  their  job  will  last  to  complete  all  the  contracts  that 
they  have,  or  whether  ships  are  going  to  be  canceled  and  they  are 
going  to  be  thrown  out. 

I  think  those  are  about  the  only  points  I  have  in  mind. 

Mr.  HURLEY.  Mr.  Smith,  you  made  the  statement  that  the  ques- 
tion of  efficiency  depended  entirely  upon  labor.  You  didn't  mean 
by  that  that  you  can't  increase  efficiency  anywhere  else  ? 

Mr.  H.  G.  SMITH.  Now,  I  mean  in  the  increased  results  that  we  can 
get  with  labor;  increased  efficiency  if  you  carry  it  through  the  ma- 
chinery or  the  material.  It  is  labor  that  is  involved  in  getting'  that 
increase.  I  mean  it  is  through  the  management — I  mean  by  labor, 
starting  with  the  manager  from  the  top  down. 

Mr.  HURLEY.  Yes,  that  is  what  I  am  trying  to  get.  It  is  fifty  fifty. 
If  you  have  an  inefficient  management,  no  matter  how  efficient  your 
labor  is,  you  don't  get  results. 

Mr.  H.  G.  SMITH.  Absolutely. 

Mr.  HuRLEf .  You  made  a  statement,  Mr.  Smith,  that  the  question 
of  price — that  is  quoting  the  prices  by  foreign  builders,  that  they 
would  not  reduce  it  materially — that  is,  they  could  not  afford  to 
reduce  it.  Do  you  know  of  any  prices  that  have  been  quoted  by  for- 
eign builders  that  are  very  much  lower  than  the  prices  that  we  are 


H.  G.  SMITH.  I  am  not  familiar  with  the  prices  that  have  been 


paying  ? 

Mr.  H.  (jr.  k-jMiTH.  1  am  not  familiar  with  the  p 
quoted.  I  have  heard  a  great  many  rumors  of  all  kinds  of  prices,  but 
I  don't  know  of  my  own  knowledge  just  what  prices  have  been 
quoted. 

Mr.  HURLEY.  I  mean  by  American  shipbuilders  to  foreigners. 

Mr.  H.  G..  SMITH.  I  don't  know. 

Mr.  HURLEY.  That  is  all,  Mr.  Smith. 

Mr.  DOWNEY.  I  might  supplement  my  statement  by  just  confirming 
the  impression  regarding  great  delays  and  great  additional  costs, 
because  of  unnecessary  changes  and  drafting  inspection.  Those  are 
not  necessary  to  make  a  good  ship.  My  judgment  is  that  our  ships 
on  an  average  will  cost  about  $75,000  more  because  of  unnecessary 


53 

changes,  and  we  are  undoubtedly  months  and  months  behind  in 
finishing  ships  because  of  that. 

Mr.  H.  A.  EVANS  (of  the  Baltimore  Dry  Dock  &  Shipbuilding-  Co., 
Baltimore,  Md.).  Our  capital  stock  is  $1,100,000;  $500,000  preferred, 
*600,000  common,  $254,000  bonds.  We  had  a  well-organized  repair 
plant  with  two  buildings,  a  good  organization,  and  capable  men.  The 
time  came  when  there  was  an  urgency  for  ships,  and  we  thought  with 
the  organization  we  had  that  it  wyas  our  duty  to  get  into  the  ship- 
building scheme  in  a  large  way.  We  also  thought  that  it  was  a  good 
opportunity  to  make  a  profit.  We  went  to  Gen.  Goethals  and  put 
the  proposition  up  to  him,  and  he  promised  us  sixteen  8,800-ton 
ships,  which  at  that  time  was  the  favorite.  He  stated  that  he  could 
not  enter  a  contract  for  more  than  eight,  because  he  had  promised 
the  committee  that  he  would  not  go  beyond  a  certain  date ;  but  that 
he  would  enter  into  a  provisional  contract  if  Congress  authorized 
him  to  go  further.  The  provisional  contract  for  the  eight  was  drawn 
up,  but  he  declined  to  sign  it,  saying  that  he  could  not  sign  a  con- 
tract like  that,  that  he  was  advised  by  the  Legal  Division  not  to 
sign  it,  but  that  we  would  get  the  eight  additional  ships. 

On  the  basis  of  having  16  ships  we  went  into  the  new  plant.    We 
have  put  all  told — the  part  of  this  that  I  am  giving  you  includes  the 
additions  made  for  the  large  oil  tankers — $4,800,000. 
Mr.  HURLEY.  That  is  plant  investment  ? 

Mr.  EVANS.  Yes,  sir.  Real  money.  We  have  four  ways  in  the  new 
plant,  one  of  the  most  modern  plants  in  the  world,  everything  built 
substantially  of  steel  and  concrete. 

Our  eight  ships  were  taken  on  the  basis  of  $158  a  ton  with  pro- 
tection both  on  steel  and  labor.  Of  those  eight  we  have  delivered 
six,  and  one  will  be  launched  on  the  31st,  and  another  one  about  the 
middle  of  June.  We  would  have  advanced  much  more  rapidly  in 
these  contracts  except  for  the  fact  that  we  had  a  large  amount  of 
repair  work.  Employing  as  many  as  3,500  men,  the  number  of  men 
available  was  limited,  and  Mr.  Schwab  directed — as  Mr.  Ackerson 
knows — that  we  keep  men  on  the  repair  work  as  it  was  more  im- 
portant than  new  work. 

We  then  entered  into  a  contract  later  on,  when  the  demand  for 
tankers  arose,  for  twelve  10,500-ton  tankers,  and  six  6,000-ton 
tankers;  12  at  the  new  yard  and  six  for  the  old  yard.  These  con- 
tracts required  material  addition  to  our  ways,  our  plant,  the  lengthen- 
ing of  the  ways,  additional  air  compression,  additional  pipe  line", 
additional  pipe  machines,  and  so  forth.  We  have  two  of  those 
tankers  on  the  ways  now ;  the  third  over  3,000  tons  fabricated  at  the 
head  of  the  ways,  and  two  of  the  6,000  tons  on  the  ways,  and  a 
large  amount  of  the  two  next  tankers  fabricated.  The  Emergency 
Fleet  Corporation  has  suspended  on  us  six  of  those  twelve  10,500- 
ton  tankers,  and  two  of  the  6,000  tons. 

At  the  present  time  I  know — and  I  think  that  everybody  in  this 
room  knows — that  there  is  a  very  great  demand  for  tankers.  We 
hope  that  we  are  going  to  get  some  of  those  tankers  reinstated. 

In  our  old  plant  within  40  days  we  will  be  out  of  work.  I  don't 
mean  that  the  plant  will  be  shut  down,  but  I  means  that  we  will  have 
to  lay  off  men  out  of  our  fabricating  shop  in  the  lower  plant.  We 
can  go  quite  a  little  bit  longer  in  the  new  plant.  On  the  letter  that 


54 

Mr.  Hurley  sent  out  I  assume  that  that  was  a  general  letter,  because 
most  of  the  provisions  did  not  apply  to  us.  The  revision  of  com- 
mandeered contracts — we  had  two  contracts  at  $116  a  ton  that  were 
commandeered.  We  didn't  ask  the  Fleet  Corporation  to  take  those 
over  at  cost-plus;  we  took  our  medicine  and  lost  money  on  both  of 
them. 

Mr.  HURLEY.  Did  you  make  any  claim? 

Mr.  EVANS.  No,  sir ;  because  we  have  later  contracts  that  there  were 
very  much  profit  in,  and  the  $116  one  we  just  threw  into  the  fire. 

The  Government  has  nothing  invested  in  our  plant.  The  appraised 
value  of  our  old  plant,  appraised  by  Day  and  Zimmerman  about  two 
years  ago,  was  $2,500,000 — two  million  four  hundred  thousand  dol- 
lars and  some  odd.  In  the  new  plant  we  have  put  in  $4,800,000. 

Mr.  HURLEY.  Additional? 

Mr.  EVANS.  Additional. 

Mr.  HURLEY.  $6,500,000  altogether? 

Mr.  EVANS.  Yes,  sir ;  more  than  that,  $7,500,000. 

All  of  our  contracts  are  lump-sum  contracts.  We  absolutely  re- 
fused to  take  any  cost-plus  contracts.  There  is  a  fixed  price,  but 
there  is  the  protection  on  labor. 

Now  the  cancellation — first  the  suspension  that  we  had,  and  then 
the  newspaper  talk  of  further  suspensions  and  cancellations  has  hurt 
our  working  force  a  very  great  deal.  The  efficiency  of  our  men  after 
the  armistice  was  signed  increased  materially.  I  don't  mean  that  we 
were  getting  up  anywhere  near  what  we  should  have  had,  but  it  in- 
creased materially.  When  this  talk  of  wholesale  suspension  came 
out — for  example,  when  the  order  went  out  to  suspend  work  on  all 
ships  whose  keels  were  not  laid,  we  would  lay  off  in  seven  days  be- 
tween 4,000  and  5,000  men.  The  men  knew  it,  and  instead  of  being  at 
their  work  now  they  are  discussing  among  themselves  what  is  going 
to  happen.  That  has  reduced  our  efficiency.  We  hope  that  very  soon 
some  action  will  be  taken. 

Mr.  HURLEY.  There  has  been  no  action  taken  toward  suspensions  or 
cancellations. 

Mr.  EVANS.  No;  but  I  mean  the  newspaper  talk.  I  think  that 
covers  everything  I  have. 

Mr.  HURLEY.  What  were  your  prices  on  tankers  and  cargo  per 
dead-weight  ton? 

Mr.  EVANS.  We  assumed  first  on  the  tankers  that  they  were  going 
to  be  about  $10,300 ;  but,  as  a  matter  of  fact,  they  run  over  that.  It 
will  be  less  than  $220.  It  is  something  less  than  $220,  depending 
what  that  tonnage  is.  It  will  probably  be  about  $215  a  dead-weight 
ton.  The  small  tankers  are  higher.  They  run  about  $230. 

Mr.  HURLEY.  What  about  the  cargo  boats  ? 

Mr.  EVANS.  The  cargo  boats  were  $158— the  flat  price.  .Now  I 
have  heard  various  shipbuilders  telling  here  what  the  ships  were 
going  to  cost  the  Fleet  Corporation.  I  don't  know  how  they  can 
do  it,  because  we  can't.  We  have  these  large  number  of  changes, 
many  of  them — not  through  any  fault  of  the^Fleet  Corporation,  but 
partly  our  fault  in  getting  in  the  estimates  late,  being  late  in  doing 
the  paper  work,  and  there  have  been  large  number  of  changes,  and 
ships  that  we  should  have  delivered  six  months  ago  have  not  yet  been 
settled.  It  is  just  through  the  machinery  we  were  late  in  getting  the 


55 

estimates  in,  but  we  can't  tell  what  those  ships  are  costing  the  Fleet 
Corporation  until  those  things  are  settled.  More  than  that,  when 
you  asked  costs,  I  assumed  you  meant  everything,  overtime — every- 
thing. We  have  only  in  the  last  two  weeks  settled  our  overtime 
claim.  About  two  weeks  ago,  so  that  we  know  how  much  we  were 

foing  to  get;  how  much  the  Fleet  Corporation  was  going  to  pay,  so 
can't  give  you  any  idea  of  what  those  ships  actually  will  cost  the 
Fleet  Corporation. 

Mr.  HURLEY.  Take  the  $158  contract  price,  and  add  to  that  what 
would  be  the  overtime  and  increased  cost  of  labor. 

Mr.  EVANS.  The  increased  cost  of  labor,  and  more  than  that  there 
was  added  to  that  the  advanced  price  of  steel.  The  Fleet  Corpora- 
tion didn't  buy  the  steel  at  the  price  that  was  put  into  our  contracts. 

Mr.  HURLEY.  They  did  not? 

Mr.  EVANS.  No,  sir. 

Mr.  HURLEY.  You  bid  $225  on  the  tankers? 

Mr.  EVANS.  Xo  sir;  it  is  about  $215. 

Mr.  HURLEY.  For  the  large  tankers? 

Mr.  EVANS.  For  the  large,  and  $230  for  the  small  ones. 

Mr.  HURLEY.  And  all  flat  prices  with  labor  and  material  guar- 
teed? 

Mr.  EVANS.  There  is  no  material  guarantee.  They  simply  stated 
that  they  would  furnish  the  steel  at  a  fixed  price,  that  is  all,  which 
was  3^  cents  then.  There  was  no  material  guarantee. 

Mr.  HURLEY.  Are  you  having  that  same  trouble  that  Mr.  Wilkin- 
son has  had  about  paying  too  much  tax  to  the  Revenue  Bureau  ? 

Mr.  EVANS.  We  are  paying  our  share. 

Mr.  HURLEY.  Well,  are  you  pajdng  so  much  that  it  affects  the 
cost  of  producing  the  ships? 

Mr.  EVANS.  Our  repair  work,  Mr.  Hurley,  is  so  large — we  run 
a  very  large  amount  of  repair  work — sometimes  having  as  many  as 
3,500  men  on  repair  work,  and  it  is  a  fact  that  the  larger  part  of 
our  profits  are  made  out  of  repair  work. 

Mr.  HURLEY.  Of  course  your  accounts  are  kept  separate? 

Mr.  EVANS.  Oh  yes,  the  accounts  are  kept  separate,  undoubtedly. 
Then  a  large  amount  is  made  out  of  foreign  repairs.  I  have  had 
that  fully  analyzed  by  outside  accountants  and  turned  over  to  Mr. 
Piez,  and  I  think  it  has  been  given  to  Mr.  Ackerson,  for  their 
personal  information,  not  to  be  used  officially  at  the  present  time, 
giving  every  contract  that  we  have — our  repair  work  for  the  Govern- 
ment, our  repair  work  for  American  private  owners,  repair  work  for 
foreign  owners,  and  full  analysis  with  the  labor,  material,  over- 
head, amortization,  revenues,  profits  and  losses;  and  when  you  put 
in  that  you  must  write  off  this  $4.800,000  plant  except  for  the  scrap 
value,  and  within  two  years  you  don't  show  a  profit. 

Mr.  HURLEY.  Have  you  any  suggestions  to  offer  regarding  how  we- 
could  cooperate  with  the  Treasury  Department  about  working  out 
this  problem  of  paying  the  high  taxes? 

Mr.  EVANS.  Well,  I  think,  sir,  it  is  going  to  be  a  very  serious 
problem.  Of  course,  you  can't  do  it  legally  now,  but  aside  from  that 
here  is  the  fear  that  the  shipbuilder  has.  Suppose  we  put  in  our 
tax  returns  this  year  and  they  accept  our  statement  of  writing  off, 
say,  $2,000,000  or"$l,  500,000.  Suppose  we  made  some  settlement  with 


56 

you  on  that  basis.  Now,  they  have  accepted  it;  it  is  passed,  we  have 
paid  our  taxes.  The  law  allows  them  three  years  to  come  back  after 
we  have  got  this  all  settled,  and  they  can  come  back  and  say :  "  This 
plant  is  worth  a  good  deal  more,  and  we  won't  allow  you  that." 

Mr.  HURLEY.  Do  you  think  it  is  fair  to  the  shipbuilding  industry, 
and  the  operating  feature  of  our  American  merchant  marine,  where 
we  are  trying  to  work  out  a  shipbuilding  problem  and  a  ship-operat- 
ing problem,  for  the  Government  to  come  in  and  take  an  enormous 
percentage  of  the  returns,  forcing  the  shipbuilders — which  they  have 
to  do — to  keep  in  a  measure  their  prices  up  for  construction,  and  in 
turning  his  ships  over  to  the  operators  at  a  high  price  and  forcing 
them  to  operate  in  competition  with  other  nations? 

Mr.  EVANS.  That  is  not  the  way  to  build  up  a  merchant  marine. 

Mr.  HURLEY.  That  is  what  I  want. 

Mr.  EVANS.  That  is  not  the  way  to  build  up  a  merchant  marine. 

Mr.  HURLEY.  That  is  the  reason  I  thought  we  might  get  an  ex- 
pression on  that. 

Mr.  EVANS.  But  we  paid  in  taxes  last  year,  where  we  had  not 
started — we  have  not  taken  a  profit  up  to  December  31  on  a  Gov- 
ernment contract;  any  profits  that  our  company  has  made  has  been 
from  requisitioned  ships  where  we  had  contracts  with  foreigners, 
and  from  repair  work.  We  paid  something  like  $700,000  in  taxes 
last  year. 

Mr.  HURLEY.  I  am  thinking  more  of  the  future  than  I  am  of  the 
past. 

Mr.  EVANS.  It  is  80  per  cent  with  us,  sir,  owing  to  our  low  capitali- 
zation— approximately  80  per  cent. 

Mr.  HURLEY.  It  doesn't  strike  me  as  being  equitable  for  us  who 
are  all  trying  to  work  out  a  problem  and  then  having  the  Government 
iri  one  particular  branch  hold  us  back. 

Mr.  EVANS.  I  quite  agree  with  you,  sir.  I  would  like  very  much  if 
we  could  have  some  of  those  suspended  contracts  back,  because  there 
is  a  demand  for  tankers. 

Mr.  HURLEY.  Could  you  get  an  order  for  some  of  those  suspended 
contracts  from  private  owners? 

Mr.  EVANS.  Some  private  owners  through  some  one  else.  I  am 
telling,  all  my  business  here. 

Mr.  HURLEY.  Certainly,  that  is  all  right. 

Mr.  EVANS.  They  came  to  me  last  week  and  said:  "It  is  going  to 
cost  the  Government  a  very  considerable  amount  on  the  present  sus- 
pensions— which  it  will — I  mean  not  the  ones  suspended  at  the  pres- 
ent time — it  is  going  to  cost  the  Government  a  considerable  amount 
per  ton."  This  private  owner  was  very  much  surprised  that  we  could 
make  delivery  of  a  tanker  in  9  months,  and  he  said :  "  Why  don't  you 
go  to  the  Fleet  Corporation  and  see  what  you  can  settle  up  those  sus- 
pended contracts  for  and  get  what  you  can  out  of  it,  and  maybe  we 
can  meet  and  take  the  rest."  I  said :  "  No,  I  would  rather  for  them  to 
settle  it.  You  go  to  the  Fleet  Corporation  and  see  if  you  can  take 
over  those  contracts."  But  Mr.  Ackerson,  probably  has  enough  pre- 
liminary figures  to  know  that  if  these  suspensions  and  cancelations 
went  any  further  it  would  cost  the  Government  almost  as  much  for 
every  ship,  and  you  wouldn't  get  any  ships. 

Mr.  HURLEY.  What  is  your  thought,  Mr.  Evans,  in  the  direction  as 
to  how  long  the  Government  should  stay  in  the  shipbuilding  business  ? 


57 

Mr.  EVANS.  That  is  a  very  bad  one,  Mr.  Hurley.  I  believe  that  with 
•our  plant,  if  we  had  a  chance  for  two  years  longer,  we  would  be  able 
to  find  contracts  abroad  that  would  keep  us  going.  In  other  words, 
it  would  be  known  that  we  can  increase  our  efficiency ;  we  know  that 
our  men  are  learning.  More  than  that  we  are  getting  a  splendid  spirit 
in  our  yard,  and  if  I  was  assured  of  work  for  two  years,  I  believe  that 
wo  could  go  it  along  with  the  foreigners.  I  don't  mean  that  we  can 
build  ships  as  cheaply  as  they  can ;  there  will  be  enough  demand  for 
ships  to  fill  them  up,  and  then  give  us  something.  We  won't  make  as 
much  profit,  but,  Mr.  Pessano,  you  have  studied  this  very  carefully, 
do  you  think  that  is  so  ? 

Mr.  PESSANO.  I  agree  with  you. 

Mr.  HURLEY.  Do  I  understand  you  to  say  that  you  feel  that  the 
Government  should  continue  building  ships  for  two  years  in  order  to 

fet  these  organizations  going  so  that  later  they  could  compete  with 
oreign  countries  ? 

Mr.  EVANS.  No,  sir ;  that  was  not  exactly  what  I  said.  I  did  not 
answer  your  question  directly.  I  simply  said  that  I  felt  in  our  yards, 
if  we  could  continue  now.  Now,  as  a  matter  of  fact,  you,  representing 
the  Government,  made  with  the  shipbuilders  an  absolute  ironclad 
contract.  There  is  no  cancel ation  clause  in  it.  You  are  breaking—- 
now understand  this  is  not  criticism  of  anybody- 
Mr.  HURLEY  (interposing).  No;  go  ahead. 

Mr.  EVANS.  You  are  breaking  an  ironclad  contract;  we  are  break- 
ing a  contract  which  you  put  me  under  bond  that  I  would  not  break ; 
then  you  go  and  break  that  ironclad  contract.  While  the  United 
States  Government  simply,  promises  the  wheat  growers  that  it  will 
pay  $2.25  for  his  wheat,  and  although  it  is  going  to  cost  millions  and 
millions,  they  are  going  to  keep  to  it,  but  the  shipbuilder  is  treated 
differently.  Now,  I  believe  that  these  contracts,  these  absolute  con- 
tracts made  by  the  Government  should  be  carried  out. 

Mr.  HURLEY.  What  percentage  of  the  contracts  that  we  made  with 
the  shipbuilders  were  later  revised  upward  in  order  to  meet  new  con- 
ditions ? 

Mr.  EVANS.  You  made  none  with  the  Baltimore  Dry  Dock  & 
Shipbuilding  Co. 

Mr.  HURLEY.  I  am  speaking  generally.  Are  you  speaking  as  to 
what  should  be  done  for  all  the  shipbuilders,  or  just  for  the  Balti- 
more Dry  Dock  &  Shipbuilding  Co.  ? 

Mr.  EVANS.  No,  sir;  I  am  only  familiar  with  my  own  company, 
I  don't  know  what  the  conditions  were  with  the  other  shipbuilders. 

Mr.  HURLEY.  How  many  contracts  did  we  cancel  with  you? 

Mr.  EVANS.  We  have  had  suspended  six  10,500-ton  tankers,  and 
two  6.000-ton  tankers. 

Mr.  HURLEY.  How  long  ago  were  they  suspended;  five  or  six 
months  ago? 

Mr.  EVANS.  I  don't  think  it  was  as  long  as  that.  Do  you  remem- 
ber. Mr.  Ackerson? 

Mr.  ACKERSON.  In  January  or  February. 

Mr.  HURLEY.  Mr.  Mull,  we  would  like  to  hear  from  you. 

Mr.  J.  H.  MULL  (of  the  W.  Cramp  &  Sons  Ship  &  Engine  Building 
Co.).  I  don't  think,  Mr.  Chairman,  it  would  be  fair  for  me  to  com- 
ment. 


58 

We  are  running  100  per  cent  Navy  work.  I  don't  think  our  con- 
dition is  in  line  with  what  the  gentlemen  here  present  have  said. 
I  don't  think  it  would  be  fair  for  me  to  make  any  remarks,  but  if 
I  can  have  a  copy  of  these  proceedings  I  would  like  to  study  them 
for  the  general  interest.  I  don't  think  that  any  remarks  that  I  could 
make  would  be  of  value. 

Mr.  HURLEY.  We  will  be  very  glad  to  furnish  them.  I  was  going 
to  say,  gentlemen,  that  our  thought  is  to  print  the  proceedings  here 
and  distribute  them  to  each  man  here,  so  that  he  may  know  all  the 
facts,  and  if  he  has  any  criticisms  to  make,  make  them  promptly, 
so  we  can  make  the  corrections  before  they  go  to  the  printer. 

Mr.  MULL.  I  might  say  one  thing,  however;  the  business  we  have 
done  with  the  Shipping  Board  has  been  the  finishing  up  of  com- 
mandeered ships.  We  delivered  the  last  one  on  Saturday.  We 
haven't  a  kick — no  doubt  you  have,  and  if  you  have  I  would  like  to 
hear  it  now. 

Mr.  HURLEY.  That  is  a  ray  of  hope.  [Laughter.]  Mr.  Brush, 
we  would  like  to  hear  what  you  have  to  say. 

Mr.  M.  C.  BRUSH  (president  of  the  American  International  Ship- 
building Corporation).  Of  course,  you  know,  Mr.  Chairman,  that  we 
are  a  Government  agency.  Our  own  investment  is  in  the  property 
and  the  only  reason  we  have  an  investment  in  the  property  is  because 
the  Government  was  not  allowed  to  buy  property  at  the  time  the 
contract  was  made.  Our  company  therefore  holds  the  property  in 
cooperation  with  the  Government.  At  the  moment  of  purchase  turn 
over  to  the  Fleet  Corporation,  or  the  Shipping  Board,  an  option  on 
the  property  at  actually  what  it  cost;  therefore  we  have  an  invest- 
ment of  about  a  million  and  three-quarters  in  the  land,  about  846 
acres,  and  there  is  a  provision  in  the  contract  that  after  completion 
of  the  contract,  if  the  Government  sees  fit,  they  may  take  this  land 
at  the  actual  purchase  price;  and  if  the  Government  doesn't  see  fit, 
they  may  either  sell  what  they  have  on  the  land  to  our  company  or 
take  it  away. 

We  have  an  original  contract  for  110  7,500-ton  ships  and  TO  8,000- 
ton  cargo  ships,  since  which  they  have  been  changed  from  cargo 
ships  to  troopships,  troopships  to  combination  passenger  and  cargo 
ships,  and  then  to  troopships  and  back  and  forth,  until  to-day  we 
stand,  so  far  as  the  TO  ships  are  concerned — the  history  of  the  B  ship 
is  a  very  interesting  history,  Mr.  Chairman.  A  very  expensive  his- 
tory to  the  Fleet  Corporation.  It  has  cost  you  a  great  deal  of  money, 
your  B  ship  program,  up  to  this  minute. 

On  January  31  we  received  a  suspension  order  on  the  last  20  of  the 
last  35  of  the  TO  B  ships.  About  two  or  three  weeks  later  we  received 
a  suspension  order  on  the  next  5  of  the  last  35  or  the  B  ships.  A  short 
time  after  that  we  received  a  cancelation  of  these  35  ships.  On  the 
29th  day  of  April  we  received  an  order  to  suspend  all  work  on  these 
ships  then  on  the  ways,  of  which  there  were  12,  up  to  that  time  our 
instructions  having  been  to  make  6  troop,  6  combination  passenger 
and  cargo  ships.  We  were  directed  at  the  same  time  to  notify  outside 
vendors  or  contractors  to  suspend  their  work  on  the  remaining  work 
of  the  23  of  those  35 ;  and  we  have  not  yet  been  notified  nor  has  a  sin- 
gle contractor  supplying  material  for  those  23  ships  received  any  in- 
formation since  the  29th  day  of  April,  that  we  are  not  likely  to  use 


59 

this  material  and  that  material  is  being  prepared  and  the  Fleet  Cor- 
poration is  paying  for  it,  and  we  are  awaiting  instructions. 

We  received  a  letter  about  a  week  ago  directing  us  to  resume 
work,  after  a  space  of  about  10  days  or  3  weeks,  on  these  12  ways — 
resume  work  on  the  ships  on  the  way,  with  the  further  advice  from 
the  division  manager,  Mr.  Higgins,  that  he  would  let  us  know  later 
about  the  remaining  23  ships.  Of  course  the  suspension  of  that  work 
on  those  12  boats  is  a  very  serious  matter  to  us,  so  far  as  our  esprit  du 
corps  in  the  yard  is  concerned.  There  was  immediately  a  rumor  that 
all  the  ships  in  the  yard  were  going  to  be  canceled  and  we  had  ex- 
actly the  same  result  that  all  of  these  other  gentlemen  had,  the  result 
of  newspaper  comment.  In  that  case,  however,  it  was  because  we 
were  directed  to  stop  work  that  night.  At  5  o'clock  we  arranged  to 
take  some  5,000  men  and  try  to  distribute  them  over  the  other  38 
ways,  which  we  did.  We  put  some  of  them  on  night  work.  We  didn't 
let  any  of  them  go.  But  the  rumor  that  all  ships  were  to  be  canceled 
necessarily  prevailed  and  had  a  very  disquieting  influence.  At  the 
end  of  a  week  or  ten  days  we  were  directed  to  resume  work  on  those 
12  ways.  We  have  undertaken  to  do  so,  but  it  will  take  several  weeks 
to  get  back  to  the  pace  we  had  at  the  time  of  the  suspension.  So  far 
as  A  ships  are  concerned,  110  A  ships,  we  have  delivered  our  18  A 
ships,  a  perfect  ship  and  a  satisfactory  ship  to  the  operating  division 
of  your  board.  We  have  launched  our  twenty-seventh.  We  will  de- 
liver our  nineteenth  to-morrow  and  launch  our  twenty-eighth  to-mor- 
row at  9  o'clock;  and  on  the  1st  day  of  June  we  will  have  launched 
24  of  those  ships  and  delivered  22. 

The  7,500-ton  ship  according  to  the  contract  is  now  a  7,700-ton 
ship,  as  specified  by  the  American  bureau.  They  have  measured  the 
ships  and  the  lowest  rating  they  have  given  is  7,704  tons,  and  the 
highest  7,880  tons. 

Mr.  DONALD.  You  mean  of  the  A  ships  ? 

Mr.  BRUSH.  Of  the  A  ships.  Instead  of  7,500  tons  they  are  7,700 
tons  and  over. 

Of  the  17  ships  delivered  up  -to  Saturday  afternoon,  when  wo  de- 
livered  our  eighteenth  ship,  we  have  the  most  favorable  reports  from 
your  own  operating  division,  both  with  respect  to  the  functioning  of 
the  ship  and  with  respect  to  the  earnings  which  those  ships  have 
made  while  being  operated.  As  an  incident  of  what  the  ships  are 
doing,  so  far  as  satisfaction  is  concerned,  the  second  ship,  the  Saca- 
rappa,  made  approximately  half  a  million  dollars  for  the  Fleet  Cor- 
poration from  Rio  to  harbor  a  month  ago.  The  Quist  Conck,  about 
which  there  has  been  so  much  conversation,  has  never  sunk,  has  never 
been  in  dry-dock,  nor  has  a  single  ship  of  ours  ever  been  in  dry-dock, 
and  we  have  a  satisfactory  report  from  the  inspection  of  the  Quist 
Conck  that  the  ship  is  fairly  satisfactory  to  you,  and  to  the  master 
in  every  respect. 

We  also  have  a  letter  from  your  Fleet  Corporation  representative 
that  the  Saugerties  was  the  first  ship  delivered  to  the  Fleet  Cor- 
poration which  upon  return  from  a  trial  trip  under  Government 
contract,  without  any  corrections,  or  changes  or  repairs  to  be  made  of 
any  character,  was  accepted  immediately  upon  her  return  from  her 
trial  trip. 


60 

We  ako  have  a  communication  from  one  of  your  captains  to  our 
own  operating  man  to  the  effect  that  the  ship  which  he  is  operating 
is,  in  his  opinion,  a  parfec^  ship. 

I  think  we  should  endeavor  to  make  clear,  Mr.  Chairman,  that  we 
are  not  old  line  ship  builders;  that  we  do  not  pretend  to  be,  nor 
so  far  as  I  am  concerned,  nor  so  far  as  I  have  knowledge,  do  we. 
intend  to  be  in  the  future.  We  were  created  for  the  specific  pur- 
pose of  building  180  ships,  and  I  assume  that  when  that  is  com- 
pleted the  disposition  of  the  property  will  be  subject  to  whatever 
the  Fleet  Corporation  desires  to  do,  they  owning  everything  on 
the  plant  other  than  the  actual  plant.  We  are  building  the  ships 
on  a  fee  basis,  not  on  a  percentage  basis,  and  while  allowances  are 
made  for  changes  in  fee  due  to  increases,  decrease  in  material  or  in- 
creases in  labor,  etc.,  the  fee  is  substantially  fixed,  being  a  normal 
maximum  and  minimum  fee  above  and  below  which  Ave  can  not  re- 
ceive any  sum. 

I  assume  that  in  all  of  these  basic  stages  which  I  have  heard  you 
gentlemen  discuss — and  I  will  frankly  say  I  am  not  a  shipbuilder,  and 
I  have  learned  more  about  shipbuilding  since  11  o'clock  this  morning 
than  I  ever  knew  before — I  assume  from  my  knowledge  of  some  of 
these  contracts  which  I  have  had  the  privilege  of  reading  in  the  past 
eight  months,  that  in  all  these  flat-price  contracts  per  ton,  allowances 
have  been  made  for  both  material  and  labor  and  overhead  increases. 
So  far  as  our  cost  situation  is  concerned,  it  is  absolutely  impossible 
for  us  to  give  you  a  figure  as  to  what  it  is  costing  per  ton,  due  to  the 
fact  that  we  don't  know  what  our  overhead  will  be,  and  we  won't 
know  until  we  know  what  is  going  to  happen  with  the  B  ships.  We 
don't  know  whether  we  are  building  30  B  ships,  12,  or  7.  We  are  per- 
fectly frank  to  state — we  have  stated  in  public  before — that  we  re- 
gret very  much  that  the  B  ship  was  ever  placed  in  the  Hog  Island 
yards.  The  yard  is  a  quantity  production  fabricating  yard,  and 
while  I  am  not  a  shipbuilder,  I  am  engineer  enough  to  be  able  to  as- 
semble steel  according  to  blue  print,  and  that  is  all  our  job  is. 

The  B  ship  has  been  a  very  serious  matter  to  us  in  a  great  many 
ways.  Unfortunately,  due  to  the  pressure  of  the  Fleet  Corporation— 
w7hich  was  legitimate  at  the  time — the  B  ship  was  scattered  in  among 
A  ships.  It  is  unfortunate  for  a  superintendent  who  is  trying  to 
build  ships  on  a  quantity  production  basis  to  have  an  8,000-ton  ship 
and  a  7,500-ton  ship  beside  it,  as  we  have  known  in  our  halfway  yard, 
5  B  ships  and  5  A  ships.  It  is  defeating  in  the  yards,  as  evidenced 
by  our  own  records,  the  very  purpose  that  the  yard  was  originally 
created  for,  and  that  was  a  quantity  production  yard.  In  our  yards 
1  and  2,  in  which  we  have  10  A  ships  each,  our  showing,  from  all  that 
I  can  learn,  compared  with  other  shipbuilding  plants,  is  as  fine  as 
anybody  could  possibly  expect.  In  the  other  three  yards  we  are 
handicapped  by  that  mixed  type  of  vessel. 

We  have  delivered  the  equivalent — or  will  have  delivered  on  the 
1st  clay  of  June — the  equivalent,  approximately,  of  170,000  tons,  and 
we  assume  that  our  job  is  not  dissimilar  to  quantity  production, 
whether  it  is  air  guns  or  sausages  or  automobiles  or  anything  else, 
and  our  success  in  getting  these  ships  down  to  a  proper  price  lies  in 
our  being  able  to  do  the  same  thing  over  and  over  again. 

Of  our  110  A  ships,  as  I  say,  we  will  have  delivered  to  the  1st  day 
of  June,  22,  and  launched  34,  and  will  have  laid  keels  for  38  more, 


61 

the  remaining  38,  the  ways  of  12  being  occupied  by  B  boats.  For 
the  remaining  38  ships  the  material  is  practically  all  on  the  ground, 
or  on  the  way  to  the  plant.  That  deals  not  only  with  the  actual 
steel  but  with  the  auxiliary  apparatus. 

I  think  it  only  fair  to  say  for  the  Fleet  Corporation  also  that  from 
the  time  we  started  the  Quist  Conck  away  from  the  pier,  up  to  this 
minute,  there  has  not  been  the  slightest  trouble  in  any  way,  shape, 
or  manner  with  a  single  movable  part  of  the  ship.  The  turbines, 
gears,  boilers,  auxiliary  apparatus,  has  been  absolutely  perfect  in 
every  respect.  The  gears  and  turbines  are  purchased  by  the  Fleet 
Corporation  and  delivered  to  us.  I  would  like  to  say,  if  I  may  be 
permitted  with  all  my  limited  experience,  that  the  subject  of  changes 
is  so  much  more  serious  with  us,  in  my  opinion,  than  it  is  with  any 
of  these  gentlemen,  that  it  is  a  matter  of  tremendous  expense  to  the 
Fleet  Corporation  and  the  Shipping  Board.  We  had  ready  this 
morning  the  eighteenth  ship.  We  got  a  receipt  for  her  Saturday. 
The  nineteenth  ship  had  her  trial  trip  Friday.  She  came  in  and  we 
would  have,  gotten  our  receipt  for  her  Saturday  noon  had  they  not 
decided  to  put  some  railings  around  the  hatches.  After  we  had 
delivered  18  ships,  Mr.  Hurdey,  according  to  specifications  and  blue 
prints,  including  the  eighteenth,  there  has  been  900  changes  to  those 
ships  since  the  1st  day  of  January.  We  had  14  ships  launched 
when  we  were  notified  by  the  local  representative,  Mr.  Higgins,  that 
he  had  decided  to  dry-dock  14  ships  in  order  to  lower  the  intake  5 
feet.  I  told  Mr.  Higgins  frankly  that  if  he  did,  the  American  In- 
ternational Shipbuilding  Corporation  might  just  as  well  quit  build- 
ing ships  that  minute,  because  we  would  be  explaining  the  rest  of  our 
lives  why  the  first  14  ships  we  launched  had  to  be  dry-docked. 
Therefore  he  waived  that  on  the  14,  but  made  me  commence  on  the 
fifteenth  ship  on  the  way,  hull  208,  and  go  to  work  and  lower  the 
intake  5  feet;  and  never  once  have  we  heard  a  single  word  from  the 
first  14  ships  delivered  in  regard  to  the  intake  being  too  high.  That 
has  cost  you  thousands  of  dollars. 

We  receive  orders  to  make  changes  in  these  ships,  Mr.  Hurley, 
within  15  minutes  of  the  time  we  are  ready  to  deliver  them.  Now7 
I  don't  think  that  is  good  judgment  for  you.  It  don't  cost  us  a 
penny,  but  it  costs  you  a  good  deal  of  money.  My  best  judgment  is 
that  you  haven't  made  a  change  on  a  ship  since  we  started  that  hasn't 
cost  you  $500;  because  it  isn't  a  question  of  what  these  gentlemen 
are  doing  on  one  ship,  sending  25  men  down  there  to  change  it;  we 
have  got  to  go  back  and  make  over  500  drawings  if  we  change  a  hinge 
on  a  door.  It  is  quantity  production.  If  we  change  the  color  of 
paint  on  a  panel,  it  is  500  drawings,  and  it  costs  a  great  deal  of 
money. 

Now  that  comes  as  the  result  of  somebody  who  is  operating  the 
ships  seeing  something  which  he  likes  a  little  better,  and  it  comes 
down  through  to  us  without  anybody  stopping  and  saying :  "  Now 
wait  a  minute;  is  this  for  the. best  interests  of  the  Fleet  Corporation, 
or  is  it  not?"  And  it  comes  down  to  us  rubber  stamped  in  our  local 
office  down  there  by  our  local  representative,  and  goes  direct  to  the 
engineering  department,  and  the  wet  basin  man,  Capt.  Bookwalter, 
is  notified  to  make  such  and  such  a  change.  I  think  it  is  a  very,  very 
serious  matter. 


62 

Now  if  we  have  delivered,  as  we  have,  18  ships,  and  your  operating- 
division  says  that  those  ships  are  perfectly  satisfactory,  and  your 
own  captains  have  written  letters  saying  that  the  ships  are  thor- 
oughly satisfactory,  then  if  I  owned  the  Emergency  Fleet  Corpora- 
tion this  afternoon  I  would  say  to  Hog  Island,  "  You  duplicate  that 
eighteenth  ship,  and  don't  you  make  a  change  of  any  description  un- 
less something  comes  through  where  it  concerns  the  safety  of  the 
vessel."  And  I  can't  possibly,  Mr.  Chairman,  make  our  position  too 
strong,  because  we  want  to  make  a  record  for  the  delivery  of  our 
ships,  and  we  can  not  do  it  if  to-morrow  Tom,  Dick,  or  Harry  can 
come  running  down  to  the  ship  and  say :  "  I  would  like  to  have  a 
hinge  changed,"  because  that  is  just  as  bad  as  changing  a  steam  pipe. 

We  took  out  of  a  ship  here  the  other  day  about  50  pieces  of  pipe 
down  in  the  bilge,  because  the  specifications,  according  to  this  man, 
said  the  bottom  of  the  pipe  should  be  within  an  inch  of  the  bottom 
of  the  bilge,  and  he  went  down  and  found  that  it  was  an  inch  and  an 
eigthth,  and  we  held  the  ship  three  days  to  take  those  out,  and  the 
ship  is  worth  $2,000  a  day  to  you.  and  It  cost  you  $6,000  and  didn't 
cost  us  a  penny.  And  God  Almighty  couldn't  tell  you  to-morrow 
whether  it  was  an  inch  or  an  inch  and  an  eighth. 

Now,  if  the  Fleet  Corporation — if  I  may  make  a  suggestion  with  all 
clue  respect — if  they  will  forbid  us  to  make  a  single  change  that 
Commander  Ackerson  does  not  sign  in  long  hand  you  would  save 
hundreds  and  hundreds  of  thousands  of  dollars. 

Mr.  HURLEY.  We  will  straighten  that  out  in  short  order.  Thank 
you  very  much. 

Mr.  C.  W.  STINER  (of  the  Saginaw  Shipbuilding  Co.,  Saginaw, 
Mich.).  I  just  want.  Mr.  Hurley,  to  explain — I  think  it  has  come  up, 
and  I  think  it  is  quite  clearly  shown  that  there  are  no  two  cases  alike. 

Now,  if  I  don't  say  anything  it  may  be  .assumed  that  somebody  else 
has  told  our  story  for  us,  perhaps,  but  we  are  a  new  concern.  We 
were  organized  in  1917,  after  a  conference  with  Gen.  Goethals.  We 
had  with  us — or  w^ere  able  to  bring  into  a  company — men  who  had  had 
the  shipbuilding  experience.  We  also  had  in  our  locality  large  shops 
where  we  could  get  not  only  our  plant  equipment  but  the  equipment 
for  ships  as  well,  in  the  way  of  boilers,  engines,  and  practically  all 
of  the  auxiliaries.  We  came  down  and  talked  to  Gen.  Goethals,  and 
he  strongly  urged  us  to  go  home  and  organize  a  company  and  get 
into  the  business,  and  told  us  that  just  as  soon  as  we  could  make  a 
proper  showing  we  would  be  given  contracts.  We  did  that,  and  we 
came  back  and  we  were  given  a  contract  for  six  ships.  Now,  we  had 
no  experience  available  and  no  data  of  any  kind,  but  we  did  the  best 
we  could,  and  we  were  given  a  price  which  we  understood  was  the 
going  market  price  with  the  Fleet  Corporation  at  that  time,  which 
was  $160  a  ton  for  the  first  six  ships. 

We  had  to  get  an  organization  together.  We  had  nobody.  We 
started  in  and  established  schools  of  training  for  men.  We  con- 
ducted those  schools  for  months.  We  began  the  building  of  our 
plant — this  was  early  in  October,  1917,  and  we  carried  on  ship  con- 
struction just  as  soon  as  we  had  a  few  men  operating.  We  started 
building  ships  and  we  have  delivered  the  ships.  We  didn't  make  any 
money  on  them,  but  we  didn't  ask  for  any  revision  of  the  contract 
price. 


63 

In  January  we  were  given  another  contract  for  6  ships  at  a  much 
lower  price  than  others  were  being  paid  at  the  time — which  we  knew 
afterwards.  We  were  working  on  those,  and  in  May,  1918,  we  were 
asked  how  many  ships  we  could  take  on  additional  for  1919  with  our 
equipment  as  it  was  outlined  at  that  time,  and  we  replied  that  we 
could  take  on  6  additional  ships  with  those  two  contracts  we  already 
had.  Then  we  were  asked  how  many  ships  we  could  take  on  if  we 
put  in  large  improvements  in  our  plant.  We  considered  the  matter 
and  felt  that  we  could,  by  making  large  extensions  to  our  plant,  more 
than  double  our  plant,  we  had  the  room — we  could  take  on  12.  We 
were  asked  to  go  ahead  and  make  these  improvements,  and  were 

fiven  a  contract  for  12  ships  at  the  time,  at  the  price  that  other 
uilders  were  getting  at  that  time.  We  went  ahead  and  we  have 
spent  over  a  million  dollars  in  the  extension  to  our  plant  to  take  care 
of  this  last  contract.  Now  we  have  been  asked  to  suspend  the  work 
on  the  last  6.  We  did  not  make  any  money  on  our  first  contract,  and 
we  hoped  under  pur  last  contract  to  get  some  of  the  money  back  that 
we  put  into  additions  to  our  plant  at  the  request  of  the  Fleet  Cor- 
poration, but  now  we  are  asked  to  suspend.  Our  contracts  had  not 
been  canceled  but  they  are  in  suspension.  The  last  6  of  the  last  12. 

Mr.  HURLEY.  What  type  of  ships  are  they  ? 

Mr.  STINER.  Four  thousand  tons. 

Mr.  HURLEY.  Where  did  you  say  you  are  building? 

Mr.  STINER.  At  Saginaw,  Mich. 

Mr.  HURLEY.  HOAV  much  is  the  Government's  investment  in  the 
plant? 

Mr.  STINER.  The  Government  hasn't  anything.  The  Government 
in  the  last  contract  gave  us,  or  agreed  to  give  us,  an  extra  $15,000 
per  ship  over  the  base  price  of  $800,000  a  ship. 

Mr.  HURLEY.  Your  investment  was  for  war  purposes  ? 

Mr.  STINER.  We  put  in  an  investment  for  war  purposes.  That 
would  be  $180,000  if  we  got  it,  but  we  spent  over  a  million  dollars  to 
do  that. 

Mr.  HURLEY.  And  the  contract  was  canceled,  and  the  money  you 
were  to  get  on  the  ships  to  be  put  into  yard  expenses  you  are  not 
going  to  receive.  I  mean  that  $15,000  a  ship  ? 

Mr.  STINER.  Well,  we  are  not  going  to  get  it  according  to  the  con- 
tract, if  the  contract  is  canceled. 

Mr.  HURLEY.  Well,  you  ought  to  get  that.     That  is  not  fair. 

Mr.  STINER.  But  the  sin  all  amount  of  the  contract  provided,  or 
gave  us,  for  these  improvements  that  we  are  paying  to  carry  out  this 
contract,  and  which  the  Fleet  Corporation  admitted  at  the  time  would 
be  of  no  value  to  us  after  this  emergency  is  over,  is  over  a  million 
dollars. 

Mr.  HURLEY.  I  don't  care  anything  about  the  amount,  I  am  speak- 
ing of  the  principle  of  the  thing.  If  the  Government  told  you  to 
construct  10  ships,  and  allowed  so  much  on  each  over  and  above  the 
price  for  which  you  were  willing  to  build  it  to  apply  to  building  the 
yard,  and  then  canceled  the  ship  after  you  invested  in  the  yard,  it  is 
not  equitable  or  just  for  the  Government  not  to  take  care  of  your  yard. 
That  is  the  point.  , 

Mr.  STINER.  We  have  never  gotten  to  that.  We  have  never  had  it 
up  with  the  Fleet  Corporation  or  anyone.  We  just  had  notice  to  stop 
work. 


64 

Mr.  ACKERSON.  Those  points  are  all  being  taken  into  account. 

Mr.  HURLEY.  I  just  wanted  to  let  him  know  our  position. 

Mr.  STINER.  I  think  the  record  here  is  going  to  be  something  you 
can  base  your  judgment  on,  and  I  wanted  to  get  that  into  the  record. 
^  Mr.  HURLEY.  We  will  now  hear  from  Mr.  Brittain,  of  the  Terry 
Shipbuilding  Co.,  and  then  Mr.  Rosseter,  the  Director  of  Operations, 
will  address  the  conference. 

Mr.  H.  L.  BRITTAIN  (of  the  Terry  Shipbuilding  Co.,  Mobile,  Ala.). 
I  represent  the  Terry  Shipbuilding  Corporation,  and  also  the  Mobile 
Shipbuilding  Co.  Mr.  Chairman,  speaking  for  the  Mobile  Ship- 
building Co.,  the  original  contract  given  to  the  Mobile  Shipbuilding 
Co.  was  for  18  composite  ships,  given  under  Gen.  Goethal's  regime 
at  a  price  fixed  by  the  Corporation,  and  based  on  contract  No.  1, 
which  was  of  a  similar  type,  there  being  no  other  method  at  that 
time  to  figure  on  the  composite  ship  cost. 

In  June  of  the  following  year  the  Government  canceled  12  of  the  com- 
posite type  ships,  and  substituted  therefor  12  5,000-ton  all-steel  vessels. 
Subsequently  we  were  asked  to  take  the  Jahncke  Shipbuilding  Co.'s 
(Inc.)  contract  of  12  ships  of  the  same  type,  5,000-ton  ships,  on  which 
contract  the  company  is  now  working. 

The  six  composite  type  ships  have  all  been  delivered.  All  of  them 
are  in  service  and  are  bringing  in  revenue  to  the  Corporation,  I  be- 
lieve, of  $2,500  a  month. 

Our  last  composite  ship  never  returned  from  its  trial  trip  to  our 
yard.  It  was  accepted  by  the  Fleet  Corporation,  by  the  Division 
of  Operations,  I  believe,  and  by  the  various  agencies  and  by  the 
charterer  and  taken  right  to  their  docks  and  cargo  loaded. 

That  completed  the  six  composite  ships  that  the  company  was 

working  on,  and  we  are  now  working  on  the  5,000-ton  all-steel  ships. 

-  On  the  12  ships  that  were  given  to  us  in  consideration  of  the 

cancellation  of  the  composite  ships  we  have  received  a  cancellation 

suspension  order. 

We  are  launching  the  first  of  the  Jahncke  ships  next  week,  and  the 
second  one  the  week  following,  or  10  days  following  and  on  two  ad- 
ditional I  think  the  state  of  completion  is  about  25  to  60  per  cent. 
We  have  had  all  of  the  steel  fabricated  for  all  of  the  ships  by  the 
Virginia  Bridge  &  Iron  Co.,  of  Roanoke.  I  understand  that  most 
of  the  steel  for  the  12  ships  has  been  fabricated,  and  all  the  steel  for 
the  first  six  is  in  the  yard  and  fabricated  and  ready  to  erect.  At  the 
Terry  yards — 

Mr.  HURLEY  (interposing).  Let  us  just  finish  that  Mobile  yard 
first,  please.  How  much  money  has  the  Government  got  in  that 
yard? 

Mr.  BRITTAIN.  Mr.  Chairman,  on  the  first  contract,  the  Govern- 
ment— the  first  contract  on  composite  ships  the  Government  ad- 
vanced to  the  yard  $400,000.  Upon  the  cancellation  of  the  12  com- 
posite ships  that  $400,000,  which  was  to  be  reimbursed  out  of  the 
last  two  payments,  was  put  over  against  the  12  all-steel  ships  and  on 
the  first  six  that  we  delivered  we  have  practically  canceled  the 
$400,000,  although  it  was  to  go  over  against  the  12  that  were  given 
us  for  the  1$  that  were  canceled. 

Now  then  on  the  12  all-steel  ships  the  Government  in  its  contract 
allowed  us  an  advance  of  $600,000  for  plant  extension — the  com- 
posite yards  being  more  or  less  a  wooden  yard  you  see — allowed  us 


$600,000  for  plant  extension  for  that  contract,  making  the  million 
dollars;  we  hadn't  paid  back  the  $400,000  on  the  deposit.  Now,  then, 
when  the  Jahncke  contract  came  up  it  developed,  I  believe,  that  the 
Jahncke  Co.  had  an  advance  from  the  corporation  of  about  $300,000. 
This  advance  Avas  absorbed  by  us,  of  $325,000  and  the  corporation 
allowed  us  an  additional  $172,500  for  plant  extension,  by  reason  of 
the  increased  facilities  made  it  necessary  for  the  building  of  those 
12  additional  ships,  amount  to  $172,500  for  plant  extension.  That 
would  total  $1,500,000  advanced  on  the  three  contracts. 

Mr.  HURLEY.  The  Mobile  yard  and  the  Jahncke  yard  ? 

Mr.  BRITTAIN.  Yes;  now  based  on  progress  payments  to-day,  Mr. 
Chairman,  on  the  number  of  ships  we  are  way  ahead.  The  payments 
are  more  than  a  million  dollars,  so  our  advance  up  to  the  present 
stage  of  completion  has  practically  been  absorbed.  We  are  working- 
on  the  basis  of  an  impressed  fund,  as  we  are  building  those  12  ships  at 
considerably  less  than  our  estimated  cost. 

Mr.  HURLEY.  What  was  the  cost? 

Mr.  BRITTAIN.  The  5,000-ton  ships  were  based  on  the  cost  price  of 
the  Submarine  Boat  ships,  $960,000  plus  and  amount  of  $20,000 
made  to  us  for  the  plant  extension.  Our  ships,  I  believe,  are  a  little 
larger  and  a  little  more  expensive  to  build  by  the  way,  so  that  our 
contract  price  on  those  ships  is  $980,000.  We  are  building  them,, 
however — we  put  in  a  detailed  estimate  of  the  cost  of  them,  and  we 
are  keeping  count  of  our  progress.  The  estimate  put  in  as  we  have 
progressed  shows  that  our  costs  up  to  the  present  time  are  consider- 
ably less  than  we  estimated  at  that  time. 

Mr.  HURLEY.  What  was  your  estimate? 

Mr.  BRITTAIN.  Our  estimate,  put  in  to  you,  Avas  $960,000. 

Mr.  HURLEY.  On  a  5,000-ton  ship? 

Mr.  BRITTAIN.  Yes. . 

Mr.  HURLEY.  And  it  is  going  to  be  below  that  ? 

Br.  BRITTAIN.  Below  that,  yes.  We  are  building,  erecting,  rivet- 
ing, and  fabricating  cheaper  than  we  estimated. 

Mr.  HURLEY.  Now  in  the  other  yard? 

Mr.  BRITTAIN.  In  Savannah  our  contract  there  was  one  of  the 
earliest  contracts  for  composite  boats,  20  composite  boats.  Gen. 
Goethals  named  the  price  on  that,  which  was  the  same  price  given 
on  the  contract  No.  1.  These  two  composites  were  practically  the  same 
price — it  was  based  on  contract  No.  1,  and  subsequently  10  of  those 
were  canceled  in  the  early  part  of  April,  1918,  and  we  were  given 
in  lieu  of  the  10  composites  canceled  a  contract  for  10  oil  tankers  of 
7,500  tons  dead-weight.  Five  of  those  were  subsequently  suspended ; 
and  we  have  fabricated  the  material  for  5,  and  the  first  keel  shows  a 
progress  of  about  55  per  cent,  the  other  about  35  per  cent.  We  are 
fabricating  all  of  the  material  in  our  yard.  We  have  a  yard  at 
Savannah  with  10  ways  and  fabricating  capacity  there  of  over  3,000 
tons  a  month ;  a  complete  machine  shop,  /outfitting  wharf,  a  complete 
plant  both  for  a  wooden  yard  and  for  a  steel  yard,  and  the  Corpora- 
tion has  advanced  us  on  that  yard  of  10  ways,  and  a  fabricating 
capacity  of  3,000  to  3,500  tons  a  month,  $1,500,000. 

We  Avere  allowed  on  our  tanker  contract  by  Admiral  Bowles 
$1,636,000  for  plant  extension.  I  cut  that  down  in  the  contract  that 
was  finally  drawn  up  to  half  of  that,  over  $800,000,  and  subsequently 

121035—19 5 


66 

we  voluntarily  reduced  it  to  $600,000;  and  we  have  stayed  within  the 
$600,000,  the  other  $900,000  having  been  expended  for  the  deposit  on 
the  composite  contracts  so  that  the  corporation  has  in  there  $1,500,000. 

Mr.  HURLEY.  In  the  Savannah  yard? 

Mr.  BRITTAIN.  Yes,  sir.  We  have  4  of  the  10  composites  on  the 
ways,  and  suspended — we  don't  know  what. 

Mr.  HURLEY.  What  was  the  cost  of  the  first  composite  ship  that 
was  built? 

Mr.  BRITTAIN.  Mr.  Hurley,  in  Mobile  our  first  composite  ship,  the 
Balino,  which,  I  think,  was  the  first  of  that  type  or  wooden  type,  to 
go  into  trans- Atlantic  trade,  and  got  insurance  on  a  million-dollar 
cargo,  cost  $840,000. 

Mr.  HURLEY.  3,500-ton  ships? 

Mr.  BRITTAIN.  Yes,  about  3,600. 

Mr.  HURLEY.  Where  are  the  Savannah  ships  that  have  been  built? 

Mr.  BRITTAIN.  The  Division  of  Operations,  I  think,  has  two  or 
three  of  them,  and  one  other  had  been  ready  for  acceptance,  and  the 
other  two  we  launched — we  were  waiting  for  some  changes  there,  and 
we  launched  the  fifth  about  two  weeks  ago.  We  will  outfit  that  in  21 
days,  and  that  will  be  ready  for  delivery  on  the  21st. 

Mr.  HURLEY.  The  composite  ships  that  you  delivered,  are  they  in 
service,  or  are  they  tied  to  the  dock?  Are  they  satisfactory? 

Mr.  BRITTAIN.  All  of  the  Mobile  composite  ships — 

Mr.  HURLEY,   (interposing).  I  mean  Savannah. 

Mr  BRITTAIN.  In  Savannah  we  were  held  up  by  certain  changes 
and  the  steering  gear  had  to  be  changed  in  practically  all  of  those 
ships.  We  had  finished  our  work  on  two  of  them  in  November, 
and  with  various  changes  in  them — I  don't  know  whether  Mr.  Ros- 
seter  can  recall — I  don't  know  whether  the  first  one  delivered  has 
been  in  service.  I  just  wanted  the  story  in  the  record. 

Mr.  HURLEY.  These  two  composite  ships,  as  I  understand  it,  the 
first  two  that  you  delivered  there  at  very  high  cost,  are  not  in  service 
and  they  can  not  be  put  in  service  on  account  of  their  condition. 

Mr.  BRITTAIN.  I  think  you  are  confusing  us  with  the  Jacksonville 
yard. 

Mr.  HURLEY.  Well,  I  may  be. 

Mr.  BRITTAIN.  Absolutely  we  have  the  highest  classification  on  the 
first  two  ships,  as  I  understand  it,  and  they  already  have  been  ac- 
cepted and  you  have  not  offered  them  for  service.  I  know  an  oper- 
ator who  would  be  very  glad  to  get  them  because  the  operators  that 
are  using  our  composite  ships  in  Mobile  are  very  anxious  to  have  that 
type  of  ship. 

Mr.  HURLEY.  I  know  about  Mobile,  but  the  Savannah  ships  I  had 
in  mind.  I  know  about  the  Mobile  ships ;  good  ships  they  are — but  I 
will  straighten  the  record  about  that. 

Mr.  BRITTAIN.  Now  six  of  the  composite  ships,  we  had  about  95 
per  cent  completed,  I  believe,  and  we  were  instructed  not  to  install 
engines  and  boilers  in  those  ships,  and  they  will  probably  be  used  as 
barges.  So  that  is  six  of  the  composite, '  and  the  four 'now  on  the 
wayc  you  haven't  determined  yet  your  policy  in  regard  to  those. 

Mr.  HURLEY.  Mr.  Evans,  I  would  like  to  mention  a  point  that  you 
brought  out  as  to  the  authorizations,  if  we  had  not  canceled  the 
1,500,000  tons  of  wooden  ships  after  the  armistice  was  signed,  we 


67 

would  have  been  way  beyond  our  authorization  instead  of  being 
within — just  practically  within — now.  I  merely  explain  that  to  you 
gentlemen  so  that  you  will  know  there  was  a  real  reason.  If  we  had 
gone  ahead  and  built  the  ships  and  spent  one  hundred,  two  hundred, 
or  three  hundred  million  dollars  more  after  the  armistice  was  signed, 
beyond  pur  authorization,  we  would  have  had  a  pretty  serious  time  in 
explaining  to  Congress.  So  there  was  method  in  our  "madness  in 
trying  to  keep  within  the  authorization. 

Mr.  EVANS.  I  understood  that  at  the  time. 

Mr.  ACKERSON.  We  would  have  been  away  beyond  our  appropria- 
tion. 

Mr.  HURLEY.  We  have  money  now  to  keep  you  gentlemen  going, 
but  otherwise  we  would  have  had  to  shut  down  a  number  of  plants, 
because  we  wouldn't  have  had  the  money. 

Mr.  ROBERT  HAIG  (of  the  Sun  Shipbuilding  Co.).  When  our  presi- 
dent was  speaking  of  the  cost  of  some  of  our  ships  he  gave  you  cost 
including  all  the  overtime  and  extra  charges.  I  noticed  that  in 
Mr.  S adder's  statement,  I  think,  and  others,  they  did  not  so  include 
their  overtime.  Our  ships  are  about  6,000  horsepower,  and  they  run 
about  $250  a  ton.  I  was  looking  at  some  figures  on  Saturday,  and 
out  of  that  about  $20  a  ton  is  overtime  and  extras.  That  was  up  to 
about  the  31st  of  December,  so  that  our  charges  on  those  ships — they 
are  twin-screw  boats,  the  very  highest  class — they  are  too  fine  to  be 
cargo  boats,  and  many  changes  have  been  made  in  them.  I  was 
interested  in  hearing  Mr.  Brush  speak  about  changes.  He  had  only 
two  types  of  ships;  we  have  had  tankers,  single-screw  cargo  boats, 
twin-screw  cargo  boats,  back  to  tankers,  back  to  cargo  boats  again, 
and  every  one  of  those  ships  probably  carried,  every  one  of  them,  an 
excessive  amount  of  changes.  True,  it  was  inevitable,  owing  to  the 
conditions  that  we  were  working  under,  that  changes  should  come 
about.  But  those  changes  run  up  the  cost  and  when  it  comes  up  to 
you,  sir,  you  have  got  to  look  at  the  cost  of  your  American  ships  in 
comparison  to  the  British  ships.  Now,  I  claim  to  have  a  fairly  close 
knowledge  of  the  question  in  British  yards.  I  was  trained  there  and 
know  it  very  thoroughly.  Within  the  last  two  or  three  weeks  we 
have  received  a  number  of  books  sent  to  us  from  the  other  side  bear- 
ing on  the  riveting  cost,  calking,  and  ship  costs,  and  so  on,  prevailing 
in  the  British  yards.  I  started  to  compare  a  few  of  them,  and  I 
thought  surely  I  was  getting  wrong  and  had  lost  track  of  English 
money  from  my  residence  here  so  long,  and  I  turned  it  over  to  our 
department  to  estimate,  and  I  found  where  we  were  paying  10  and  12 
cents,  I  think  it  is,  for  riveting  our  angles  in  the  center  keelson  as 
she  runs  up  into  the  forecastle — where  we  were  paying  10  or  12  cents 
they  were  paying  4J  cents.  They  were  paying  6  cents  a  hundred  for 
running  that  work  up,  and  we  were  paying  10  and  12  cents  for  the 
same  work.  Their  calking  and  shipping  did  not  run  up  into  such 
differences,  but  it  was  so  marked  that  I  am  having  it  laid  out,  our 
cost  and  their  cost,  line  by  line,  and  I  will  be  very  glad  to  complete 
it  and  send  it  down  to  you,  because  it  will  be  illuminating. 

Mr.  HURLEY.  Thank  you  very  much.    We  will  be  glad  to  have  it. 

Mr.  HAIG.  That  has  just  come  over  within  the  last  three  weeks, 
and  it  is  from  the  most  reliable  sources  because  it  is  from  the  man- 
ager's working  book  out  of  three  yards ;  compiled  out  of  three  yards 


68 

and  sent  over  here.  It  is  not  the  official  book  of  any  union,  but  it  is 
the  working  manager's  book  covering  rates  charged  by  the  unions, 
covering  certain  work.  Mr.  Evans  spoke  of  the  difference  in  the 
British  yards  and  here.  I  have  knowledge  of  them  both,  but  what  I 
would  like — and  I  can  not  too  strongly  emphasize  what  Mr.  Smith 
has  said,  and  Mr.  Brush,  about  the  cost  of  operations  now  on  those 
big  boats.  We  have  had  four  extra  bulkheads  put  into  those  ships. 
Now  you  can  imagine  wThat  that  means  in  the  dissipation  of  our 
work.  In  another  ship  we  had  three  main  boilers  in  when  we  got 
instructions  to  put  in  twin  boilers.  That  meant  carrying  the  ship 
out  and  bringing  this  main  boiler  through  the  cargo  hole  into  the 
stoke  hole.  That  main  boiler,  I  think,  cost  about  three  times  the  cost 
of  the  boiler  before  it  was  landed  in  the  ship. 

Now  you  can  see  that,  let  your  organization  work  ever  so  efficiently, 
the  price  of  American  ships  is  going  to  go  up  high.  They  can  not  do 
otherwise — unless  you  do  as  the  British  builders  do.  We  have  some 
specifications— no  doubt  mo'st  of  the  shipbuilders  have — of  British 
specifications,  and  they  will  not  change  a  thing — they  wouldn't 
change  a  mooring  bit  on  the  deck  if  it  is  going  to  interfere  with  the 
run  of  their  work.  The  president  of  our  yard  was  over  in  Europe 
at  Christmas  time,  in  January.  He  was  unfortunate  enough  during 
the  war  to  lose  a  British  ship,  and  his  money  is  lying  in  the  Bank 
of  England,  but  you  can  not  use  it  except  to  build  a  new  ship ;  and 
he  in  conversation  wifch  the  yard  that  built  the  former  ship,  asked 
them  what  they  would  duplicate  it  for,  and  they  said  they  would 
duplicate  it  for  $175  a  ton.  He  said,  "  No,  I  will  not  give  you  a  con- 
tract. Will  you  do  it  for  £30  a  ton?"  They  said,  "  We  will  build  the 
ship  on  £6  a  ton  profit,"  $30  off  and  on — "  but  we  will  not  enter  into 
a  specific  contract." 

'Now  that  was  in  January,  for  a  tanker  about  8,000  tons  dead- 
weight. But  I  would  just  as  strongly  emphasize  at  this  point,  and 
impress  upon  you  and  your  board,  the  necessity  of  cutting  down 
changes.  You  may  authorize — your  board  may  authorize  a  change  at 
an  initial  cost  of  $100,  but  it  will  cost  you  $1,000.  You  dislocate  so 
much  work.  You  stop  that  work  that  is  in  progress  in  the  vicinity 
of  it;  the  men  get  disheartened  Avhen  they  take  things  out.  To-day 
we  have  a  ship  in  the  docks — I  am  not  complaining,  mind  you;  it 
is  our  business  to  do  what  you  want,  and  we  are  not  complaining. 
We  have  the  warmest  relations  with  our  Shipping  Board  and  with 
the  Emergency  Fleet.  We  acknowledge  the  services  that  they  have 
given  us;  we  acknowledge  their  readiness  to  cooperate  with  us;  we 
acknowledge  that  in  full.  But  now  this  ship  comes  back  on  her 
first  trial  trip  perfectly  satisfactory,  but  we  get  an  order  within 
three  or  four  days  to  raise  the  stack  16  feet.  We  were  told  that  our 
stack  tank  was  in  excess  of  what  the  requirement  was,  and  we  were 
ordered  to  raise  the  stack  16  feet,  by  the  operating  division.  Now, 
that  doesn't  seem  much.  It  meant  about  five  days'  work  lifting  the 
stack  off  and  then  elongating  it,  but  our  wireless  comes  within  20  feet 
from  the  top  of  the  stack,  and  that  meant  that  wTe  should  throw 
away  our  topmast  and  rigging,  and  we  put  those  topmasts  up  20 
feet.  Now  you  see  the  initial  cost  of  the  stack  was  very  small,  but 
we  discovered — we  scoured  the  whole  country  to  get  a  new  topmast 
and  finally  bought  them  from  the  Emergency  Fleet  in  Philadelphia. 
But  they  were  hard  to  get  and  it  cost  lots  of  money.  I  am  only  giv- 


69 

ing  you  two  or  three  instances  now  to  show  you  that  if  you  can 
eliminate  these  changes — the  British  shipbuilders  are  facing  an  in- 
creasing cost  of  shipbuilding,  there  is  no  doubt  about  it.  The  British 
shipbuilder's  cost  is  not  going  down;  the  British  shipbuilder's  labor 
is  going  up.  The  American  shipbuilder's  cost  is  going  to  come 
down  because  his  efficiency  is  improving,  and  if  you  can  reduce  this 
interference  with  the  contract  after  it  is  let  and  say,  "Mr.  Smith, 
there  is  your  contract — there  are  your  specifications  and  we  will  close 
it  with  you ;  meet  the  classification  requirements,  whatever  they  are, 
and  we  will  accept  the  ship,"  then  you  are  going  to  get  very  much 
increased  efficiency  in  the  cost  of  the  ship,  and  you  are  going  to  get 
the  ship  built  very  much  quicker  and  are  going  to  be  able  to  look 
the  public  in  the  eye  and  say,  "We  are  building  the  ship;  take  it 
for  good  or  bad,  we  are  all  through." 

The  American  shipbuilder  turns  out  a  much  finer  cargo  boat  than 
the  British  shipbuilder  turns  out — Mr.  Donald  with  his  long  ex- 
perience in  shipowning  will  back  up  what  I  sav,  that  we  turn  out 
here  higher  class  cargo  or  passenger  boats  than  are  turned  out  in 
England  for  the  same  class  of  work.  They  turn  out  special  ships, 
special  work,  that  we  don't  touch,  probably,  but  the  cargo  boat 
to-day  or  the  passenger  boat  to-day  that  was  built  in  England,  and 
the  same  type  of  boat  built  in  this  country,  this  country's  ship  is  the 
better;  and  if  the  American  shipowner  will  say,  "I  want  a  cargo 
boat  to  carry  bulk  cargo,  two-deck  cargo  boat,  shower  baths,  indi- 
vidual sleeping  quarters,"  then  he  will  get  his  ship  according  to  the 
specifications,  comfortable  for  the  men,  good  to  navigate,  and  within 
the  money. 

Mr.  HURLEY.  I  would  like  to  ask  you  gentlemen,  is  the  Newburgh 
Shipyard  (Inc.)  represented  here?  There  is  a  statement  given  out 
from  some  source,  not  by  the  press,  that  they  have  accepted  two 
orders  from  the  sulphur  company  at  $175  a  ton,  the  United  Sulphur 
Co.  Is  that  correct?  Do  you  gentlemen  know  anything  about  it? 

(A  portion  of  the  record  was  here  ordered  stricken  out.) 

I  would  like  to  hear  from  Mr.  Rosseter  now. 

Mr.  ROSSETER.  Perhaps  all  of  you  gentlemen  know  that  I  have  been 
giving  my  time  and  energy  entirely  to  the  Division  of  Operations, 
endeavoring  as  far  as  I  can  to  establish  and  perpetuate  the  Ameri- 
can merchant  marine.  Thus  I  do  not  come  very  closely  to  your  con- 
struction problems.  However,  the  questions  of  construction  and  op- 
eration after  all  are  very  closely  related.  In  the  first  place,  for  suc- 
cessful operation  you  must  have  ships  which  can  operate  successfully 
in  hard  times ;  a  real  hard-time  ship.  A  ship  that  will  do  well  when 
rates  are  high  and  business  plentiful  may  perish  under  the  reverse 
conditions.  So,  going  back  to  the  clays — the  happy  days — when  I  was 
in  business  life  and  not  in  Washington,  I  remember  that  the  greatest 
trouble  I  ever  had  was  to  decide  on  specifications  at  the  time  a 
ship  was  ordered  that  would  be  entirely  complete  and  final.  The 
specifications  that  were  given  to  the  builder — and  in  those  days  it  was 
generally  a  British  builder — were  as  exact,  full,  and  satisfactory, 
and  as  final  as  they  could  be.  Nevertheless,  as  time  went  on  changes 
did  develop.  We  always  considered  a  change  from  the  standpoint 
of  how  much  it  would  cost  and  how  much  would  it  delay  the  ship. 
The  cost  we  got  from  the  builders ;  the  delay  we  figured  ourselves. 


70 

Now,  I  say  this  because  I  am  tremendously  conscious  of  the  impor- 
tance of  complete  specifications  of  a  satisfactory  ship.  Still,  you 
gentlemen  know  that  in  the  hurry  of  building  our  emergency  fleet 
not  much  attention  was  given  to  design,  or  the  balancing  of  the  fleet, 
nor  to  specifications  or  class,  because  there  was  no  time  for  it.  No 
one  was  to  blame  for  that ;  the  problem  was  to  get  a  ship  that  could 
go  to  sea  and  successfully  arrive  at  a  foreign  port. 

Having  made  a  great  many  changes  in  November  last,  I  can't  help 
but  be  very  conscious  of  the  fact  that  a  good  many  of  these  remarks 
have  been  directed  at  me.  However,  some  of  the  statements  are  per- 
fectly astonishing  and  surprising  to  me.  I  want  to  say  that  I  agree 
entirely  with  Mr.  Brush's  statement  that  any  change  made  should  be 
over  the  longhand  signature  of  an  important  official.  There  is  no 
question  about  that.  Altogether  I  have  dealt  personally  with  not 
exceeding  50  changes  in  the  entire  fleet  of  the  Shipping  Board. 
Whether  other  changes  were  made  I  do  not  know..  If  they  are  made 
by  inspection  agencies  that  discover  faults,  probably  they  are  well 
considered,  and  possibly  they  are  not.  But  this  point  I  would  like 
to  emphasize,  Mr.  Chairman :  It  is  rather  surprising  that  for  the  first 
time  I  hear  of  500  changes  having  been  made.  I  am  very  accessible ; 
anybody  can  come  into  my  office,  and  nobody  has  come  to  me  and 
said  those  changes  have  been  made.  In  fact,  to  tell  the  frank  truth, 
I  had  great  difficulty  in  putting  over  some  of  the  few  changes  I  made. 
For  instance,  I  will  take  the  case  which  came  up  the  other  day,  that 
Mr.  Ackerson  knows  of,  where  I  wanted  a  No.  5  double-bottom  con- 
nected up  for  fuel  oil.  I  wanted  that  No.  5  bottom  coupled  up  for 
fuel  oil  for  the  reason  that  it  was  not  required  for  fresh  water,  and 
by  adding  this  double-bottom  to  the  oil  supply  it  would  enable  the 
ship  to  make  a  complete  European  round,  without  replenishing 
bunkers.  Well,  I  think  it  was  three  days,  probably,  before  that 
change  was  ordered. 

You  know  we  find  some  very  funny  things  about  ships.  Mr.  Brush 
has  told  you  how  favorably  the  Division  of  Operations  reported  on 
the  Hog  Island  ships.  That  is  true.  I  have  been  interested  to  see 
the  "  come-back "  from  our  operators  and  from  our  supercargoes 
and  from  the  captains.  Nevertheless,  it  is  very  fresh  in  my  mind  that 
the  first  ship  that  came  out,  the  Quistconck,  the  Navy  refused  to 
man  and  advised  me  not  to  accept  because  she  was  considered  unsea- 
worthy.  I  sent  her  to  sea,  gave  her  a  36-hour  trial,  and  on  my  own 
responsibility  ordered  her  accepted.  Little  points  like  that,  you 
know,  it  is  well  to  bear  in  mind. 

When  we  come  to  talk  about  the  cost  of  a  ship,  much  depends  on 
the  type.  I  was  making  some  figures  here  a  little  while  ago,  going 
back  in  my  memory.  The  lowest  priced  ship  that  I  remember  evel 
being  contracted  for  in  England,  of  a  plain  cargo  type,  was  con- 
tracted for  at  about  $32  a  ton,  the  price  in  pounds  Sterling  reduced 
at  the  normal  rate  of  exchange  made  that  ship  cost  about  $32  a  ton. 
At  that  very  time  I  ordered  four  other  ships  from  British  builders. 
I  was  very  familiar  with  the  ship  that  was  ordered  at  $32;  I  went 
carefully  over  all  of  the  specifications  and  embodied  some  features  in 
my  own  specifications,  but  added  a  good  many  other  features.  Three 
of  those  ships  we  contracted  for  at  $41  a  ton,  an  advance  of  $9.  That 
advance  in  price  is  not  a  proper  criterion  of  the  cost  of  building 


71 

abroad  or  building  in  this  country.  That  has  to  be  considered  from 
the  standpoint  of  efficiency  and  from  the  value  of  the  investment  in 
the  special  features.  At  the  same  time  a  fourth  ship  I  ordered  cost 
$61  a  ton. 

Now  those  ships  were  not  all  of  the  same  type,  but  they  were  prac- 
tically of  the  same  type,  inasmuch  as  the  $32  ship  was  8,000  tonsr 
the  $41  ships  were  9,400  tons,  and  the  $61  ship  was  7,600  tons.  So, 
therefore,  you  have  a  spread  right  away  of  $9  between  the  price  of 
the  British  tramp  and  the  improved  cargo  boat  which  we  selected  to 
order ;  and  then  again,  another  spread  of  $29  to  the  high  type  com- 
bined ship,  a  ship  that  had  some  limited  passenger  space,  that  had 
refrigeration  and  speed,  and  had  a  greater  steaming  radius.  Concur- 
rently with  that  order,  or  within  six  months  afterwards,  we  ordered 
three  ships  in  the  United  States  from  Mr.  Mull.  Mr.  Mull  will  cor- 
rect my  impressions — I  am  speaking  now  from  memory — but  as  I 
recall  it  we  paid  $76  for  those  ships. 

Mr.  MULL.  That  is  correct. 

Mr.  ROSSETER.  We  paid,  I  think,  about  $15  higher  than  you  would 
have  built  a  very  good  ship  for  us,  because  we  demanded  of  you  a 
very  superior  ship.  You  remember  the  ship  ? 

Mr.  MULL.  Very  well. 

Mr.  ROSSETER.  Therefore,  when  you  talk  about  relative  British 
prices  and  American  prices,  it  is  a  very  misleading  proposition. 
The  real  analysis  of  shipbuilding,  to  my  mind,  of  course,  we  all 
know  it — is  made  up  of  three  elements;  material,  labor,  and  over- 
head. We  are  to-day  standing  with  probably  no  very  great  advan- 
tage over  the  British  on  the  point  of  material,  but  we  have  some 
advantage.  I  happen  to  know,  for  instance,  that  there  is  a  large 
order  here  from  England  for  ship  materials,  which  is  ready  to  be 
placed,  and  on  which  they  will  have  to  pay  a  freight  rate  of  $20  a 
ton.  That  is  a  cent  a  pound  on  steel,  practically,  and  the  order  is  for 
no  less  than  60,000  tons.  So  we  do  have  some  advantages,  and  should 
have  more  advantages,  on  the  question  of  the  price  of  materials. 

On  labor  we  have  some  disadvantages.  But  the  real  crux  of  the 
question  is,  how  much  do  you  add  for  overhead  ?  Now,  gentlemen,  I 
am  not  talking  about  emergency  construction  or  what  we  did  in  the 
past,  because  all  of  you  men  have  had  to  take  into  account  a  very 
serious  item  for  overhead  if  you  expected  to  do  war  work  and  under- 
take an  enormous  expansion  of  your  yards,  as  compared  with  the 
British  shipyards  which  have  existed  for  50  years  and  have  been 
building  up  slowly  year  by  year,  with  the  capital  cost  being  either 
written  off  or  reduced  to  a  very  insignificant  item. 

Now  I  have  asked  the  opinion  of  one  of  the  best  authorities  in  the 
United  States — you  will  pardon  me  for  not  referring  to  him  by 
name — and  these  are  the  figures  he  has  given  me — Prewar:  Labor, 
$26;  material,  $24;  overhead,  $12.  Total,  $62. 

I  reminded  him  that  at  about  that  period — certainly  just  before 
the  war — a  contract  had  been  let  with  one  of  the  large  Atlantic 
builders  for  a  tanker  at  $55  a  ton.  His  answer  to  that  was  that  those 
people  were  facing  an  initial  loss  of  $7  a  ton  on  that  contract.  Well,, 
certainly  the  cost  at  that  time  must  have  been  somewhere  between 
$55,  for  which  the  tanker  was  contracted,  and  $62,  which  my  friend 
estimated  that  it  was  going  to  cost.  Now  coming  back  to  this  time 


72 

lie  figured:  Material,  $65;  labor,  $70;  overhead,  $32;  practically  a 
270-per  cent  increase  on  all  three  items. 

If  there  is  one  point  that  I  would  like  to  bring  forcibly  to  the 
attention  of  the  men  in  whose  hands  the  destinies  of  American  ship- 
building are  entrusted,  because  they  are  to-day  undertaking  that 
activity,  it  is  the  importance  of  coming  to  a  reasonable  basis  of 
overhead.  I  want  to  declare  here  and  now  that  I  am  seriously  and 
enthusiastically  committed  to  the  perpetuation  of  the  industry  of 
shipbuilding  in  America,  but  I  am  conscious — and  each  of  you  must 
also  be  similarly  conscious — that  at  this  moment  you  are  facing  a 
crisis;  we  are  crossing  a  river,  and  if  this  thing  is  dropped  now,  if 
before  private  enterprise  comes  in  the  Government  lets  go,  I  don't 
know  what  will  happen  to  the  industry.  We  are  undoubtedly  facing 
a  situation  to-day  where  we  have  at  least  a  100-per  cent  excess  of 
shipbuilding  capacity  in  the  United  States.  One  of  the  first  things 
we  must  do  is  to  correct  this  condition.  If  it  means  the  wiping  out 
of  yards,  it  means,  in  effect,  the  reimbursement  by  the  Government 
of  the  cost  of  installation  as  war  work  and  as  war  cost,  but  it  should 
not  be  handed  down  to  the  future  and  the  coming  generations  as  an 
element  of  the  cost  of  what  we  shall  do  from  this  day  forward.  I 
am  not  looking  backward ;  I  am  trying  to  look  forward.  All  of  these 
troubles  that  have  passed  concern  me  very  little.  As  an  operating 
man  I  know  that  if  we  are  to  have  a  merchant  marine  we  must  have  a 
shipbuilding  industry.  As  I  have  said  on  several  occasions  with 
reference  to  the  old  conundrum,  "  Which  came  first,  the  hen  or  the 
egg,"  I  don't  know  and  I  don't  care  which  came  first,  but  I  do  know 
that  if  we  are  to  have  a  merchant  marine,  we  must  first  have  the 
ships,  and  we  must  be  able  to  build  ships  in  competition  with  the  rest 
of  the  world. 

'We  hear  a  great  deal  of  stress  laid  on  the  disadvantages  of  operat- 
ing costs.  From  the  operating  standpoint  I  give  very  little  account 
to  that,  but  I  do  attach  great  importance  to  this — we  must  have  the 
right  type  of  ship,  and  on  that  type  of  ship  the  base  price — not  for 
the  refined  ship,  however — must  be  right.  You  can  not  expect  Con- 
gress any  more  than  you  can  expect  private  capital  to  build  ships  in 
America  at  a  higher  base  cost  than  they  can  be  built  elsewhere.  I 
am  very  glad  that  Mr.  Hurley  has  given  me  this  opportunity  to 
impress  this  point  on  you.  I  am  thinking  of  this  thing  day  and 
night.  You  think  of  it  from  your  shipbuilding  end;  if  you  will 
allowT  me  to  emphasize  it,  I  think  of  it  from  both  sides;  I  think  of  it 
as  an  operator,  and,  as  an  operator,  where  am  I  going  to  get  the 
ships?  As  I  said  before,  the  right  kind  of  a  ship  is  a  matter  of 
design,  but  the  right  price  is  what  we  must  have  from  you. 

We  are  now  here — it  is  Mr.  Hurley's  desire,  and  I  think,  the  pur- 
pose of  this  meeting,  to  reach  a  good  understanding.  So  far  as  I 
am  concerned,  and  so  far  as  it  is  within  my  power,  instead  of  inter- 
fering with  or  adding  burdens  to  the  shipbuilders,  or  making  con- 
struction more  difficult  or  more  costly,  I  would  say,  let  us  go  very 
slowly  and  decide  exactly  what  we  want;  put  it  down  in  black  and 
white,  reduce  it  to  a  blue  print,  and  stick  to  it.  But  what  were  we 
to  do  when  ships  wrhich  were  built  for  overseas  service  had  a  steam- 
ing radius  of  a  thousand  miles  or  so,  and  an  initial  radius  of  2,800 
miles  was  required  ?  Something  had  to  be  done  about  it. 


73 

We  built  ships  where  the  winches  were  so  deficient  that  they  broke 
down  the  first  time  they  were  started,  and  every  day  you  tried  to 
work  you  had  to  change  the  winch.  There  can  be  no  argument  about 
the  need  for  that  change.  That  is  what  is  back  of  us. 

Now  if  you  find  any  needless  changes — Mr.  Hurley  will  no  doubt 
institute  a  very  thorough  search  of  this  whole  thing,  and  I  shall  be 
glad  of  it. 

Let  us  get  back  to  Mr.  Brush's  idea  that  if  we  have  to  make  a 
change,  let  us  analyze  it;  let  us  have  the  order  signed  in  longhand 
by  the  men  responsible  for  it.  This  matter  of  cutting  an  eighth  of 
ail  inch  off  of  a  suction  pipe  into  a  double  bottom  of  course  is  the 
height  of  absurdity.  That  is  one  of  the  stupid  things  that  will  occur, 
a  net  there  must  be  some  appeal  from  a  thing  like  that.  And  the 
heightening  of  a  smokestack — do  you  know  what  case  that  was? 

Mr.  HAIG.  The  Marica,  the  steamer  Marica. 

Mr.  ROSSETER.  Did  you  ever  hear  of  the  change  ? 

Mr.  ACKERSOX.  No. 

Mr.  HAIG.  We  are  not  complaining,  you  understand. 

Mr.  ROSSETER.  I  am  glad  you  brought  it  up,  however,  for  I  want 
the  matter  investigated.  Don't  think  I  am  complaining;  I  want  these 
things  brought  out.  As  I  have  told  you,  I  haven't  dealt  with  50 
changes  in  our  ships  myself.  Here  I  am  in  my  office  where  certainly 
enough  people  come  in  who  have  nothing  at  all  to  say  to  me,  while 
you  men,  who  might  have  something  to  say  do  not  come  in.  I  shall 
be  glad  to  hear  you. 

Mr.  HAIG.  Probablv  we  will  now. 

Mr.  ROSSETER.  I  think  I  am  the  most  accessible  man  around  here. 
I  have  been  on  the  job  pretty  nearly  every  day,  unless  once  in  a  while 
I  have  cheated  a  little  and  gone  away  for  short  rests  and  recreation. 

Maybe  the  heightening  of  that  smokestack  was  an  Army  change. 
Now  we  come  back  to  another  condition.  We  have  had  the  Army 
and  the  Navy  changing,  and  then  we  have  had  the  Army  change  the 
Navy.  We  have  then  come  into  the  thing  and  looked  at  it  and  have 
found  those  changes  were  wrong,  and  have  gone  back  as  nearly  as 
we  could  to  the  original  specification.  I  want  to  tell  you  that  every 
time  I  have  looked  at  a  plan,  I  have  looked  at  it  from  the  stand- 
point of,  "How  closely  can  we  adhere  to  the  original  drawing?" 
I  think  Mr.  Mull  and  Mr.  Riggs  will  bear  me  out  on  that.  Mr.  Mull 
went  over  some  plans  with  me  when  there  was  a  question  of  moving 
the  bulkheads,  and  finally  we  found  a  way  so  that  there  would  be 
no  changes  in  the  bulkhead  at  all.  I  know  it  is  a  fatal  thing  to  go 
into  the  yard  and  upset  everything  by  asking  for  changes,  but  on 
the  other  hand  if  a  change  is  essential,  is  there  anybody  here  who 
will  not  say  that  the  time  to  make  the  change  is  when  the  ship  is 
being  built  instead  of  waiting  until  the  ship  enters  service?  There  is 
no  argument  about  that. 

Now,  reverting  again  to  the  item  of  ship  costs.  We  hear  a  great 
deal  about  what  ships  are  costing  in  Great  Britain.  This  same 
authority  that  I  have  quoted  before  told  me  that  you  can  authorita- 
tively say  that  the  best  price  for  which  a  ship  can  be  built  to-day  in 
England  is  £28  per  ton  (figuring  it  at  $5,  and  that  is  $140)  with  a 
stipulation  that  the  buyer  will  pay  any  advance  in  wages  and  any 
increase  in  the  cost  of  materials,  as  of  the  date  of  the  contract,  and 


74 

also  with  an  understanding  that  delivery  would  not  be  made  earlier 
than  a  year  and  a  half. 

Now  the  situation  in  England,  as  I  see  it,  which  is  due  to  the  dis- 
turbed conditions  resulting  from  the  coal  inquiry,  miners'  wages, 
going  up,  cost  of  coal  increasing,  and  thus  in  turn  increasing  the  cost 
of  train  operations,  manufacturing,  and  living;  and  last  of  all  the 
very  serious  effect  it  has  on  British  shipping,  inasmuch  as  it  pro- 
duces higher  costs  for  their  propelling  power,  as  they  are  resting  on 
coal — places  us  to-day  in  an  advantageous  position.  We  have  an 
opportunity  now,  that  probably  has  never  before  come  to  a  nation, 
to  really  perpetuate  this  industry  of  shipbuilding.  But  Mr.  Hurley 
is  conscious,  as  I  am,  of  the  fact  that  there  is  an  enormous  amount 
of  criticism  in  the  House  and  the  Senate  of  the  fact  that  we  have 
been  paying  too  much  for  our  ships;  and  that  we  have  been  build- 
ing ships  that  are  not  entirely  suitable;  and  that  it  is  asserted  that 
this  business  of  the  building  of  ships  by  the  Government  has  to  stop. 
A  lot  of  people  are  saying  that  the  authorizations  will  not  be  trans- 
lated into  appropriations,  except  for  the  expense  of  indemnifying 
the  builders  for  reasonable  claims.  Well,  that  is  a  very  unhappy 
situation,  and  I  can  say  to  you  sincerely — and  Mr.  Hurley  will  bear 
me  out — that  since  January  I  have  tried  to  bring  this  message  back — 
that  no  matter  what  the  cost  of  building  in  England  is,  why  can't  we 
match  it?  We  can  match  it  in  two  ways.  We  must  cut  down  our 
shipbuilding  plants ;  we  have  got  to.  We  have  twice  as  many  plants 
as  we  need,  and  we  must  cut  them  50  per  cent.  Now,  where  will  that 
cut  fall  ?  Unhappily  it  will  fall.  It  may  fall  on  a  great  many  men 
that  I  am  speaking  to  now,  and  I  am  sorry  to  think  of  their  partic- 
ular cases,  but  it  will  certainly  fall  on  the  inefficient;  it  will  also 
.fall  largely,  and  fortunately,  on  the  Government  enterprises  of  ship- 
building. Hog  Island  will  naturally  have  to  come  down  at  least 
to  a  very  much  smaller  establishment,  and  probably  will  be  made 
available  for  private  enterprise  as  against  Government  operation. 
It  will  fall  on  the  Lakes,  because  after  all  the  builders  on  the  Great 
Lakes,  because  of  the  limitations  imposed  by  the  canal,  as  all  of  these 
gentlemen  have  very  fairly  recognized,  must  go  back  to  the  business 
that  they  had  before  the  war.  That  is,  they  must  very  largely  go 
back  to  that.  Modern  operation  requires  an  entirely  different  type 
of  ship  from  what  we  have  had  in  the  past,  and  a  large  measure  of 
that  difference  is  in  the  size.  We  now  have  plans  for  a  15,000-ton 
ship  that  can  be  manned  for  practically  the  same  cost  as  our  8,000-ton 
ship,  and  at  an  extra  cost  of  a  portion  of  a  decimal.  When  we  enter 
into  this  important  problem  of  building  up  our  foreign  trade,  the 
bulk  of  which  will  rest  on  space  articles  like  coal,  in  which  com- 
modity we  are  going  out  to  get  a  share  of  the  world's  trade  in  com- 
petition with  Great  Britain,  we  must  have  a  ship  that  will  deliver, 
as  they  do  on  the  Lakes,  a  ton  of  coal  a  thousand  miles  as  cheap  or 
cheaper  than  any  other  nation  in  the  world  can  do  it. 

In  the  reconstruction  program — Mr.  Hurley  has  reminded  me  of 
it — in  the  revision  of  our  program  great  attention  has  to  be  given 
to  the  larger  ship.  Unfortunately  we  can  not  turn  to  the  Lakes  for  a 
great  number  of  ships.  When  we  go  out  in  the  world  to  compete  for 
world  trade,  those  Lake  ships,  serviceable  as  they  have  been  and  as 
they  are  to-day,  will  be  a  handicap. 


75 

Out  on  the  Pacific  coast  they  build  a  type  of  ship  generally  known 
as  the  West  type,  a  very  good  ship,  but  we  have  too  many  of  them. 
We  have  too "  few  ships  of  more  than  10,000  tons.  If  you  gentle- 
men ever  look  at  the  register  published  by  the  Division  of  Opera- 
tions you  will  see  what  a  small  column  represents  ships  over  10.000 
tons.  Whatever  it  was  that  started  people  in  Great  Britain  to  build- 
ing large,  fast  ships,  led  in  the  proper  direction  and  they  were  very 
wise  in  doing  it.  As  an  operating  man  I  can  tell  you  with  all  sin- 
cerity that  the  difference  between  a  moderate-size  slow  ship  and  a 
large-size  fast  ship  is  the  difference  between  black  and  red  ink,  the 
difference  between  success  and  failure. 

Xow,  you  can  go  up  to  Congress — I  should  like  to,  so  far  as  I  can — 
and  assure  the  members  of  the  Senate  or  House  committees  that  the 
American  shipbuilder  is  conscious  of  his  responsibility;  that  he  is 
going  to  tide  this  thing  over ;  and  that  such  aid  as  the  Government 
has  to  give  in  the  way  of  continuance  of  this  program  will  be  em- 
ployed to  build  these  12,500  and  15,000  ton  ships,  of  which  I  have 
estimated  we  should  have  at  least  100,  and  I  believe  they  will  see 
their  way  to  make  the  necessary  money  available.  It  would  not  be 
wisdom  for  Congress  to  go  on  appropriating  money  for  an  inefficient 
program.  If  you  get  down  to  a  10  or  20  year  building  program, 
and  with  it  to  the  old  efficiency  that  you  had  before  the  war,  the 
industry  will  improve  its  position.  But  you  must  get  away  from 
the  wretched  "  cost-plus  "  system,  with  a  lot  of  drones  in  the  yards, 
and  riveting  costing  20  cents — not  8  cents  or  4  pence  halfpenny,  or 
2  and  6  or  2  pence  halfpenny  or  whatever  it  was,  but  to  20-cent 
riveting — and  that  was  the  general  run  of  riveting — and  until  we  get 
away  from  the  "  soldiering  "  of  men  and  until  we  eliminate  from  the 
yards  all  of  these  auditors,  comptrollers,  and  checkers  who  every- 
body knows  are  a  handicap  to  the  business  and  a  great  cost  to  the 
Shipping  Board,  we  will  never  get  down  to  sound  prices. 

Therefore  it  is  your  responsibility  to  come  forward  and  recognize 
what  Mr.  Hurley  is  trying  to  do  here;  come  forward  and  look  at 
some  of  the  specifications  we  have.  If  you  do  not  like  them,  tell  us 
how  to  change  them,  tell  us  what  you  want  to  do,  and  then  come 
forward  and  say :  "  We  will  give  you  a  lump-sum  price  of  so  much 
a  ton  for  that  program."  Then  we  can  draw  up  a  contract  and  get 
a  price  that  is  justified. 

Xow,  finally,  before  I  go,  a  number  of  you  men  have  protested  here 
to-day  against  the  changes  that  have  been  ordered.  You  have  made 
me  bleed,  and  if  what  you  say  is  true,  it  is  a  shame.  But  the  correc- 
tion is  in  your  own  hands.  Why  don't  you  come  forward  and  say 
these  things  ?  Please  do  it.  I  am  here  all  the  time,  and  at  any  time 
that  you  have  a  question  that  you  would  like  to  raise,  you  will  find 
me  glad  to  go  into  the  matter  with  you,  not  only  from  the  standpoint 
of  utility,  but  of  what  it  means  in  your  work,  what  it  will  cost,  and 
how  much  it  will  interfere  with  you,  and  if  the  balance  is  wrong  I 
will  cancel  the  change.  So  far  as  I  am  concerned,  it  will  never  go 
any  further.  Therefore  don't  hesitate,  please,  but  come  and  see  nie. 
Is  there  anything  else  you  want,  Mr.  Hurley  ? 

Mr.  HURLEY.  No. 

Mr.  WILKINSON.  Will  you  give  us  those  figures  again  on  prewar 
costs  and  present  costs,  so  that  we  may  take  them  down?  I  mean 
labor,  material,  and  overhead. 


76 

Mr.  ROSSETER.  Labor,  $26;  material,  $24;  overhead,  $12.  That  is 
a  total  of  $62. 

Mr.  WILKINSON.  Then,  since  vou  gave  us  the  second,  will  you  give 
that? 

Mr.  ROSSETER.  The  second,  material,  $65 ;  labor,  $70 ;  overhead,  $32. 
Total,  $167.  Now  please  understand  these  are  not  my  figures.  I  ex- 
pect you  gentlemen  to  produce  figures  much  lower  than  that. 

Mr.  WILKINSON.  You  said  that  you  had  an  English  cost  there  of 
so  much  per  ton.  What  was  that  ? 

Mr.  ROSSETER.  Forth-eight  pounds. 

Mr.  DONALD.  That  is  for  tank  steamers. 

Mr.  HURLEY.  We  will  adjourn  in  a  few  minutes.  I  would  like 
briefly  to  say  that  this  meeting  has  been  very  helpful  to  the  members 
of  the  board,  and  I  hope  it  has  been  helpful  to  you  gentlemen,  in 
helping  us  to  arrive  at  a  better  understanding. 

Now  first,  Mr.  Ackerson,  have  the  gentlemen  handling  claims  in- 
Philadelphia  given  instructions  to  be  fair  and  just — and  they  want 
to  be — in  the  settlement  of  every  claim.  W^e  are  not  trying  to  split 
hairs  on  this  proposition;  we  are  trying  to  be  just. 

In  addition  to  that  we  have  submitted  or  will  submit  a  plan  to 
Congress  on  the  ownership  and  operation  of  our  fleet.  That  is  step 
number  one. 

We  had  to  decide  on  an  objective,  how  many  ships  to  build.  So  we 
decided  that  50  per  cent  of  our  commerce  should  be  moved  in  Ameri- 
can bottoms.  Then  we  started  out  to  find  out  what  sort  of  ships  we 
should  have  to  move  that  amount  of  commerce.  If  we  move  100  per 
cent  of  our  commerce,  our  ships  will  be  coming  back  in  ballast.  You 
know  the  English  never  moved  over  60  per  cent.  In  taking  that 
step  we  find  that  we  have  a  great  many  ships  of  the  Schuyler  type 
still,  and  a  type  that  is  not  really  efficient. 

Mr.  Rosseter  is  making  a  report  on  the  style  and  type  of  ships  that 
we  should  have  in  the  operating  of  a  fleet,  an  efficient  fleet.  We  are 
not  going  to  take  any  step  until  we  talk  with  you  men  again,  but  we 
are  all  very  anxious  to  have  3^011  study  this  thing,  certainly  from  the 
shipbuilder's  point  of  view,  from  the  ship  operating  point  of  view 
and  from  the  country's  point  of  view ;  and  I  want  to  say  that  I  believe 
that  I  speak  for  the  other  members  of  the  board  when  I  say  that  we 
are  going  to  talk  to  you  men  very  soon  again,  and  we  want  you  to  be 
ready  to  say:  "Well,  we  can  join  with  you  in  your  recommendations 
to  Congress  heartily,  sincerely;  we  believe  you  are  right,  and  we 
would  like  to  have  you  recommend  the  building  of  a  million  or  two 
million  tons  of  additional  shipping,  of  a  type  and  style  different  from 
those  you  are  now  building." 

Now  that  is  what  we  are  trying  to  do,  but  we  have  to  act  quickly, 
and  we  don't  expect  you  gentlemen  to  commit  yourselves  in  any  way. 

This  has  been  a  sort  of  a  "  get  together "  meeting ;  getting  ac- 
quainted. We  have  profited  by  it,  but  we  want  you  to  know  our 
'point  of  view.  We  are  as  directly  concerned  as  you  are  in  the  em- 
ployment of  labor,  the  building  of  ships,  and  the  operating  of  ships, 
but  we  must  look  at  it  as  a  whole,  and  we  must  take  Congress  into 
our  confidence.  We  must  be  able  to  say  to  Congress :  "  You  are 
justified  in  building  these  ships  at  these  prices."  And  we  are  not 
trying  to  get  you  down  to  $100  a  ton.  If  you  gentlemen  don't  make 
some  readjustments  and  revisions,  and  we  don't  work  out  some  plan 


whereby  the  Government  is  not  going  to  take  all  this  money  away 
from  you  and  ruin  the  shipbuilding  industry,  it  is  going  to  be  hard 
to  accomplish  anything.  I  am  going  to  start  to-morrow  morning 
with  the  Treasury  Department  and  see  what  can  be  done,  and  in  doing 
that  I  will  advise  you  what  results  are  obtained. 

Mr.  Stevens,  have  you  anything  that  you  want  to  say  ? 

Mr.  STEVENS.  No. 

Mr.  HURLEY.  Now  I  will  be  glad  to  get  your  reaction  on  these 
points.  I  would  like  to  have  a  committee  appointed  on  this  income 
tax,  or  to  have  you  make  any  other  suggestions  that  you  want  to,  but 
we  want  you  with  us,  and  we  want  to  be  with  you.  We  want  to  build 
ships  in  American  shipyards. 

Mr.  BRITTAIN.  What  have  you  found  from  your  study  of  the  situ- 
ation in  England  as  to  the  relative  costs  in  American  and  English 
yards  ? 

Mr.  HURLEY.  We  couldn't  buy  any  ships  in  the  English  yards  at 
fifty-fifty.  They  know  as  much  about  it  as  we  do.  But  we  are  all 
getting  light.  There  is  no  danger  about  that,  either  in  operation  or 
construction. 

Mr.  BRITTAIX.  There  were  some  figures  that  Mr.  Haig  had  there, 
for  instance,  about  5  cents.  On  our  tanker  construction — I  just 
looked  at  the  record  yesterday — our  piecework  averages  5  cents,  or 
around  5  cents,  while  in  the  straight  work  it  averages  from  11  to  13 
cents  for  driving  rivets  on  tanker  construction.  It  would  be  inter- 
esting to  know  how  that  compares  with  the  English  yard  in  cost. 

Mr.  EOSSETER.  That  is  a  good  idea. 

Mr.  BRITTAIN.  That  is  on  tanker  construction. 

Mr.  ROSSETER.  That  is  very  good. 

Mr.  WILKINSON.  There  is  just  one  word  I  would  like  to  say  and 
then  I  am  through.  Remember  that  80  per  cent  of  every  vessel  to- 
day in  the  w^orld  is  under  5,000  tons,  and  remember  you  can't  build 
a  vessel  for  a  certain  place  where  the  water  is  shallow  and  where 
it  will  take  25  years  to  deepen  it,  any  larger  than  the  water  is.  You 
can't  build  it  larger  than  the  terminals  will  take,  than  the  docks 
will  take,  than  the  business  will  take.  Of  course,  I  am  an  optimist, 
but  you  can't  turn  this  shipping  business  all  over  into  20,000-ton 
vessels  to-morrow  any  more  than  we  could  take  the  4,000-ton  boat 
on  the  lakes  which  we  started  with  and  put  the  12,000  and  15,000 
boats  to  all  the  docks  and  handle  it  successfully.  The  vessels  ran 
for  12  years  before  they  broke  even  when  they  made  the  boats  too 
]arge. 

I  just  wanted  to  put  that  into  your  mind  so  that  you  may  keep 
your  feet  on  the  ground  relative  to  making  them  all  35.000  tons. 

Mr.  BRITTAIN.  The  largest  ports  in  the  world,  I  think,  take  5,000 
tons  or  less. 

Mr.  ROSSETER.  I  appreciate  you  jump  in  your  figures  very  fast. 
You  jump  at  from  15.000  to  20,000  and  then  to  35,000.  My  own  opin- 
ion is  that  we  should  not  build  over  15,000  tons ;  that  that  is  the  maxi- 
mum of  size. 

Now,  about  the  draft  of  the  ships,  I  will  tell  you  this  ship  that  I 
built  in  England  for  $61  a  ton  steams  12J  knots,  has  a  steaming 
radius  of  18,000  miles,  and  arrives  at  any  port  in  the  world  drawing 
only  20  feet  of  water. 


78' 

Mr.  WILKINSON.  You  have  got  to  have  something  more  than  feed. 
This  vessel  that  I  speak  of  that  was  too  large  went  to  all  the  ports  in 
the  Great  Lakes,  but  they  couldn't  make  a  dollar  out  of  her  fo.k  12 
years. 

Mr.  ROSSETER.  Probably  one  of  the  troubles  of  ocean  navigation  is 
that  you  must  not  get  your  large  ships  too  long-legged.  You  can  have 
them  as  long  as  you  please,  or  as  broad  as  you  please,  unless  you  are 
going  to  Australia  where  they  have  narrow  bridges  and  you  can't  get 
through ;  but,  generally  speaking,  the  limitation  is  the  leg  of  the  ship. 

Mr.  WILKINSON.  I  have  seen  a  little  in  the  papers  about  it.  and 
that  was  why  I  thought  I  would  drop  a  word. 

Mr.  MULL.  We  have  built  14  ships  of  the  same  type,  and  that  means 
that  they  must  have  given  satisfaction,  and  I  will  say  this,  I  represent 
a  shipyard  that  has  been  in  business  for  70  years ;  40  years  of  that  70  I 
have  been  with  them.  And  in  regard  to  the  big  ship,  the  big  tonnage, 
I  think  we  built  the  only  trans-Atlantic  ships  that  crossed  the  Atlantic 
up  to  the  war  time,  and  there  were  only  four — the  St.  Louis,  the  tit. 
Paul,  the  Kroonland,  and  the  Finland,  and  I  know  the  serious  need  of 
ships  of  that  type,  more  like  the  Kroonland  and  Finland,  I  would  say, 
rather  than  the  St.  Louis  and  St.  Paul.  They  made  big  speed  and 
held  the  world's  record  for  several  years. 

I  want  to  say  further  about  the  prices  you  gave,  Mr.  Rosseter,  while 
it  is  perfectly  immaterial  to  me,  I  wish  you  would  say  I  didn't  give 
them  to  you.  [Laughter.] 

Mr.  ROSSETER.  I  am  speaking  of  the  prices  on  English-built  ships 
and  the  relative  percentage  between  operation,  labor,  etc. 

Mr.  MULL.  The  other  prices  I  admit. 

Mr.  HURLEY.  Now,  gentlemen,  don't  hesitate  to  come  in  and  see  us 
at-  any  time  if  there  is  anything  on  your  mind.  We  want  to  work  with 
you  and  expect  you  to  work  with  us. 

(Whereupon,  at  5.55  o'clock  p.  m.,  the  hearing  adjourned.) 


o 


RETURN  TO  the  circulation  desk  of  any 
University  of  California  Library 
or  to  the 

NORTHERN  REGIONAL  LIBRARY  FACILITY 
Bldg.  400,  Richmond  Field  Station 
University  of  California 
Richmond,  CA  94804-4698 

ALL  BOOKS  MAY  BE  RECALLED  AFTER  7  DAYS 
2-month  loans  may  be  renewed  by  calling 

(415)642-6233 
1 -year  loans  may  be  recharged  by  bringing  books 

to  NRLF 
Renewals  and  recharges  may  be  made  4  days 

prior  to  due  date 

DUE  AS  STAMPED  BELOW 


AUG111989 


APR  0  &  1989 


Santa  CrtzJitrwy 


«^s.  me. 

Makers 
,  Calif. 

JAN.  21.  1908 


GENERAL  LIBRARY  -  U.C.  BERKELEY 


8000^57577 


36055 

CC> 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


